Last year, Canadian investors’ financial wealth suffered its first decline since the global financial crisis, according to new research from Toronto-based research firm Investor Economics.
In 2018, discretionary financial wealth — including deposits, investment funds and securities holdings — declined by 1% to $4.4 trillion, the firm reported.
This marked the first dip in financial wealth since 2008, it noted.
The erosion in investors’ wealth was driven by a 5.7% drop in equities, coupled with a 3.7% decline in long-term investment funds, which more than offset a 4.7% jump in deposits.
“The final months of 2018 delivered a sobering message to Canadian households and the financial services industry alike, with market concerns over Brexit, a U.S.-China trade war, and other factors depressing asset valuations and prompting a rise in interest rates,” said Goshka Folda, president and CEO of Investor Economics, in a statement.
“This has translated into a sharper focus by Canadian households in diverting discretionary financial assets toward lowering personal debt with associated adverse impacts for the retail financial services industry,” she added.
In fact, Investor Economics estimated that an added $45 billion was directed to debt repayment in 2018.
“From the perspective of the retail financial services industry, this could be viewed as a direct reduction in the addressable market for the wealth management and banking industries in 2018,” the firm said.
Investor Economics projects that aggregate household financial wealth will grow at an average annual rate of 5.6% over the next 10 years, down from 6.7% growth from 2008 to 2018.