Tips for Client Education

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

This November marks the 10th anniversary of Financial Literacy Month, and this year financial literacy is more important than ever. The Covid-19 pandemic took us all by surprise. A recent CIBC survey found that four out of 10 respondents are worried about the effect of Covid-19 on their savings and retirement plans, with almost a quarter being unable to contribute to their retirement nest egg since the pandemic began. Furthermore, 26% of those between the ages of 34 and 55, and 20% of Canadians over the age of 55, have been unable to contribute to their retirement savings since the pandemic began. Many feel their expectations for their post-work lives have changed, so some are letting go of their dreams of traveling and others are planning to work longer.

As financial advisors, we have the ability to step in and help calm the waters. We can help clients reassess their plans and get them back on track to achieving their goals. But, ultimately, for clients to have true peace of mind, we have to provide them with knowledge and direction. Many Canadians feel they lack the confidence to manage their finances and are especially concerned when experiencing market volatility. They need to feel empowered to take charge of their situation, and this confidence comes with a good understanding of basic financial concepts.

Here’s some financial literacy tips that we’re sharing with our clients this Financial Literacy Month. For retirees or those nearing retirement, the retirement savings that they’ve been working on building up their entire lives may have been significantly impacted by market volatility. You may notice that these clients are more fearful and may be planning to cash out all of their investments in the haste of the moment. These clients should be a high priority in connecting with, and with high frequency, providing sound advice during this challenging time.

This is a great opportunity to re-evaluate their plan, specific to any impact of funding retirement and educating them on the historical market fluctuations and how things tend to bounce back over the long run. Focusing on conversations framed with financial literacy and education on investment planning, specific to how their portfolios are and will evolve over time, will provide clarity and increase confidence for clients. This is also an opportune time to touch on estate planning. Remind them of the importance of planning with other professionals regarding the setup and updates of wills, powers of attorney, and having those important conversations with their family and executors.

For students, this year may look a little different. They may be engaging in a lot more virtual classes and commuting less, and there’s the potential that their part-time work was affected by pandemic closures. This is a great time to educate them on budgeting, as they are likely experiencing many changes in their cash inflows and outflows. Provide them with user-friendly online tools like budget calculators, and educate them on the effective ways to track and manage spending on credit facilities to better manage their money through this time.

For affluent clients and high-potential starters, this pandemic may be amplifying their financial position. Recent reports have shown that the pandemic seems to be further widening the income gap, so some people are actually doing better financially. In your conversations with these clients, consider elevating their financial literacy around investing, secure those additional finances they’re experiencing right now and teach them how to grow them with investments to help work towards their long-term goals.

For newcomers, this can be an exceptionally difficult time because not only are they adjusting to life in a new country, they are doing it through the pandemic. For them, financial literacy should consist of the most important foundational concepts. Talk to them about their source of income relative to their basic expenses like rent, food, utilities and medical costs. Basic budgeting is extremely essential here. Tie in how credit cards work and how to manage that debt so that it doesn’t get out of hand. Helping them build a solid foundation will help set them off on the right foot and secure your advisor-client relationship for the future. You may want to direct them to government and community programs that could help them and their family get set up.

And, lastly, for all clients, no matter how they’re faring through the pandemic, it’s a good time to touch upon financial literacy concepts like emergency savings. The importance of having emergency savings should be clear, but help them actually put this knowledge into action. Talk to them about setting up a regular savings plan or putting a specific amount of money aside where it can stay secure for a rainy day. It’s also beneficial to discuss revisiting retirement planning or starting to help them envision long-term financial goals and what it will take to get there. So, to recap, there is no better time to have financial literacy conversations with your clients than right now.