How to Help Clients Cope with Inflation

Featuring

Carissa Lucreziano, CFP

From

Text transcript

Carissa Lucreziano, vice president of financial and investment advice with CIBC.

In the most recent CIBC Financial Wellness Poll, we asked about top concerns when it comes to the personal financial situation of Canadians and inflation was the top concern overall at 69%. But it was even more elevated among retirees at 78%.

When things feel uncertain, it’s important to bring back the focus on what is actually within our control. Nobody can control inflation, but we can control how we respond to these economic changes. An advisor plays a critical role by providing clients with timely insights, advice and resources. To help clients better manage their financial situation, share your insights on the market and economic environment and its impact to their personal situation with a focus on simplifying the noise. Especially during times like these of rising rates, inflationary pressure and concerns of a recession, clients will benefit from your guidance and your expertise, helping them build confidence.

So thinking about this opportunity, there’s a few things to consider. One, investment review. For equities check for enough exposure to broad-based Canadian equity funds that include dividend growth and energy, materials, and that exposure is not too narrowly focused. For fixed income you want to look at the mix of short to medium term. Assess where high interest cash funds or GIC ladders can be used within the overall portfolio strategy.

Second, review clients’ overall wealth. Reassure clients that OAS and CPP payments are inflation adjusted. Consider the option of deferring either or both programs for higher future payments if that’s an option and additional inflation protection. Review whether a client’s workplace pension is inflation protected. Many private sectors’ plans aren’t.

Last you can look at the inflationary impact of the client’s income and expenses. Some areas of retirement spending, like healthcare and travel, tends to be increased by more than just inflation. Review all sources of income, employment, pension, investments, for example, and for clients with high exposure to inflation consider maintaining part-time employment or consulting since this income provides an inflation offset. For clients with income properties, you can show that rent increases may be capped depending on province and may not fully offset higher inflation.

If a client is just about to retire, or has just entered the next chapter of their journey, it is important to review their lifestyle goals. They may have had original goals, for example, traveling six months of the year or taking up that golf membership. In this case it’s important to think about what costs have increased associated with those goals. Also, an important consideration, has the sediment towards those goals changed? Over the last several years many individuals and Canadians in general have reassessed their goals. So taking a good look at this and taking a good look at goals, as well assessing the budgets associated with those goals will help clients really see clearly and into the future of their retirement. Your advice, even in the most foundational form, will help build your client’s financial confidence and wellbeing and at the same time, build trust in your relationship.