Get through lean times

The developed world is in the middle of a deleveraging cycle that could last the next five years.

International Monetary Fund stats on household debt ratios show that while the U.S., U.K., Germany and Japan have seen families reduce spending to be more in line with income, that’s not happening in most other European countries.

One might safely assume Canada’s strong economic performance during the recession would give us a free pass on that phenomenon.

Numbers say otherwise.

Statistics Canada data for Q3 2012 show Canadian families owe $1.64 for every after-tax dollar they earn. And credit-reporting agency TransUnion finds average Canadian consumer debt surpassed $27,000 during Q4 2012.

Late 2011 numbers (the most recent available) from the Organisation for Economic Co-operation and Development (OECD) put household debt-to-income ratios in Canada at 183.7—a dead heat with Australia, and only surpassed in the survey by Switzerland, Ireland, and the Netherlands.

That makes the Spanish at 140.5 look like spendthrifts; and the Italians at 80.1 or the Belgians at 91.7 wildly frugal.

Canada’s consumers, though, are hinting they plan to cut back.

RBC’s Canadian Consumer Outlook study finds: 31% say they’ll reduce debt in 2013, while 26% will spend less, 25% will save or invest more, and 20% say they’ll do some combination of all three.

Given the current mood, advisors would be smart to assume the role of ally in what’s sure to become a war on debt; a reliable guide who shows ways to save and become debt-free faster.

Providing help lets you stay in clients’ screens. One advisor I spoke with recently added a roundup of discount coupons and exclusive savings deals to his regular email market commentary.

Successful advisors know acting in clients’ best interests during difficult times is a reliable way to build loyalty, and it also paves the way for future business.

In addition to helping them save money on household expenses, team up with other experts who can help you play a greater role in their financial lives.

With debt reduction as the prime focus, tap a tax expert to find savings through income splitting, deductible expense claims, and taking advantage of various tax credits and grants. Or collaborate with a mortgage broker to help clients renegotiate or refinance a mortgage at a lower interest rate.

Both tactics can prevent them from leaving money on the table. And the resulting free cash can be allocated toward debt repayment.

Put clients on the path to extra savings, and differentiate yourself from people who merely sell products and repeat soothing words.

Advisors willing to build their offerings have the best chances for long-term survival. The rest risk redundancy.