Financial advice key to a cushy retirement

By Greg Dalgetty | June 25, 2020 | Last updated on June 25, 2020
2 min read
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People who receive financial advice are more likely to enjoy a cushy retirement than people who don’t — and they’ll also make a greater contribution to GDP, according to a new report.

The report, prepared by the Conference Board of Canada for the Investment Funds Institute of Canada (IFIC), evaluates the impact financial advice has on individual savings by comparing two hypothetical savers with the same income: one who uses an advisor, and one who doesn’t.

Early savers — those who start saving at age 25 — who don’t use an advisor spend 3% more during their working years and have 19% less savings in retirement. A financial advisor could have boosted an early saver’s retirement savings by 55% and retirement consumption by 23%, the report found.

Late savers — those who start saving at age 35 — who don’t use an advisor were also assumed to spend 3% more during their working years, ending up with 20% less savings in retirement. The report found an advisor could have boosted a late saver’s retirement savings by 60% and retirement consumption by 25%.

The report also found that financial advice contributes to the economy.

If the number of people who use an advisor increased by 10%, household wealth would increase by $2 billion, real GDP would increase by $900 million and tax contributions would increase by $7 billion, according to the report.

“This research demonstrates the important long-term benefits of saving money with the guidance of a financial advisor,” Paul Bourque, president and CEO of IFIC, said in a statement. “The increase in savings not only enables Canadians to more effectively prepare for retirement, it strengthens the broader economy.”

However, the report did note that recent survey data indicate that many working Canadians aren’t preparing for retirement.

“As such, a significant share of the future elderly will likely experience declines in their consumption in retirement,” the report stated.

Greg Dalgetty