In what is likely for many to have been the most trying year of their careers, it appears advisors have two things to be thankful for – Tax Free Savings Accounts and long-term investment horizons.

Although the Advisor Group’s latest Dollars & Sense survey of advisors doesn’t find tons to cheer about, it does determine advisors across the country feel confident their clients are in it for the long haul.

To be sure, advisors aren’t seeing clients emptying their savings accounts into investments. By far the top client stress reported by advisors (39%) is market uncertainty. But much more meaningful is the fact that clients say they’re not ready to give up on advice. Of the more than 1,000 advisors responding to the survey, only 19% said the idea of not having enough money for retirement was causing clients the most stress or concern. And this leads one to assume clients still feel they’re on track to reach retirement goals.

A failure of the latter, would suggest clients have little faith in the value of advisors, of which more than two thirds (70%) of advisors with clients in the accumulation phase – which represents more than half of the identified Canadian clientele – placed having enough for retirement in their top three planning priorities.

Advisors responded that nearly 60% of their clients 65 or older have saved sufficiently for retirement. For the lucrative- and-near-retirement boomer demographic, which represents those aged 47 to 64, advisors said that 53% were saving sufficiently.

Product Usage

When it comes to how advisors are actually imparting advice, it’s clear that TFSAs figure prominently. Across all three segments of client demographics, those in accumulation phase, those in a transition phase and those in retirement, advisors were consistently recommending their clients contribute to a TFSA. For the clients in the accumulation and transition phases, 81% of advisors were most frequently recommending TFSAs, and nearly three quarters of advisors (74%) were recommending them for retirees.

The TFSA is only one-year old, so it’s clear advisors have been extremely fast adopters of the product. With its substantial tax advantages, it has likely been an easy way to get some regular small figure contributions in an otherwise difficult environment.

Somewhat of a surprise, though, was uptake on the Registered Educations Savings Plan, which was the most frequently recommended investment vehicle to clients in the accumulation phase at 85%. Closely following this were mutual funds in general at 84%.

For retirees, after the TFSA, the most recommended wealth vehicle were mutual funds at 65%, closely followed by GICs at 64%.

Only one in five advisors recommended ETFs to clients in the accumulation phase, while even fewer, 16% and 13% respectively, recommended this growing product class for clients in the transitional phase and retirement.

Guaranteed Minimum Withdrawal Benefit products (GMWBs) do have substantial uptake in the transitional and retirement phases, with 35% and 41% of advisors recommending them to people in those respective phases. GMWBs had much higher penetration for clients in the transitional phase, but half of survey respondents recommended traditional annuities for clients in retirement.

On the insurance side, term is king with 73% of advisors recommending a term insurance policy to clients in the accumulation phase. In comparison only 39% of advisors are frequently recommending universal life policies (39%) and even fewer are suggesting whole life (34%).

When asked what clients need product-wise to better serve their clients, income generation came out on top. One in four advisors identified “more products tailored to income generation” as their top product priority to better to serve client needs. Nearly two-thirds of advisors (64%) put better income generating products in their top three priorities.

Following close behind, in terms of identified importance, were more products tailored to capital preservation, 22% of advisors listed it as their top product wish, and 61% listed it in their top three priorities.

Low-fees seem to figure prominently in the sales pitch of advisors. While ETF usage was relatively low, 45% of advisors said they save money for their clients by offering in reduced fees, while 41% say they use low-cost instruments.

Advisor demographics

Based on this year’s survey, it’s clear that the majority of advisors in Canada are overwhelmingly male (77%), earn most of their income from commissions and are less than two decades from retirement.

Despite a lot of financial press in the last year extolling the virtues of fee-only planning, only 3% of advisors identified themselves as fee-only. Nearly three quarters of Canadian advisors (73%) derive at least a part of their income commissions, with 49% identifying themselves as purely commission-based.

The majority of advisors disclose how they are compensated to clients, with 62% saying they provide documentation that outlines how they’re paid. Of those who do this, 54% actually go through the document and review how this compensation works with the client.

Essentially half the survey respondents (51%) said they were MFDA-licensed. Another third were licensed to sell insurance, and a quarter had a securities license with IIROC.

The average age of advisors that responded to the survey was 47, with nearly a third of respondents identifying themselves between the ages of 45 and 54, and a further 23% falling between the ages of 55 and 64. Based on the average target retirement age given at 66, this has the majority of Canadian advisors reaching retirement in less than 20 years.

Despite this, only 39% of respondents say they have succession plan, with 58% of them saying they haven’t thought about a succession plan. Less than half of those who responded that they have a plan have identified an actual successor (only 14%). Coincidentally only 14% of advisors who responded to the survey were in the 18-to-34 demographic – the natural age group to succeed the retiring crop of advisors.

If this trend continues, the advice channel in Canada is going to suffer from either a serious labour shortage or a massive consolidation of client accounts – unless advisors prolong their retirement dates. If current responses are any indication, this may not be the case, since only 4% of respondents to the survey were working advisors over the age of 65.