Ally Pyle
February 02, 2024
The sooner the better when it comes to financial planning
Many Canadians tend to wait until they are within eye shot of retirement before starting to engage in financial planning, while some never plan at all. We have long held that planning is not just for pre-retirement, but for all stages of life. In previous newsletters, we looked at how even seniors have a use for a comprehensive financial plan, to examine issues pertaining to the estate and contingencies for medical care later in life. This week, we wanted to look at the other side of the age spectrum and how planning really should be encouraged for young adults.
For the first time in perhaps forever, young Canadians are showing a desire to become more engaged with their finances at an early stage. Some of this can be attributed to social media and the greater rapidity of information flow, not to mention an increased push in the advertising space by non-traditional advising platforms. The latter, as a driver behind an increased interest in gaining control over their financial situation, is ironic given that the focus of this advertising is on the fee paid for an investment portfolio and not the more important issue of actually getting in front of an advisor or planner to assess current cash flows and to map out the future. The other driver is the reality check of a much higher cost of living than their parents or grandparents had to deal with. Rents have soared in recent years and the price of a home has galloped out of reach of so many, especially in light of the sharp increase in mortgage rates. This doesn’t include the cost of sending their children to post-secondary school down the road.
These challenges at the start of adulthood can create anxiety in the present moment, but also add to uncertainty as to what the future will hold. When can they retire? What will the labour market be like, not only for them, but for their children as well. Will the public safety net be as intact as it is today? Then again, we are also looking at a substantial transfer of wealth which might offset some of the pressures facing them. What we have found with every generation is that the easiest way to mitigate anxiety and concerns over the future is by creating a holistic plan that can then evolve along with the individual and/or family, allowing them to explore scenarios and to provide a framework for budgeting and saving.
FP Canada conducts a Financial Stress Index survey every year, in 2023 they surveyed 2,004 Canadians across a diverse age range and cultural background. In 2023 they found that money is a top life stressor with almost half of Canadians (48%) losing sleep over it. This might not come as a surprise given the record high inflation rates we have seen following the pandemic. The largest contributors to financial stress are saving enough for retirement, paying bills, saving for major purchases or expenses and reducing debt. Yet, even with this increased stress, only 36% of Canadians are engaging with a financial professional, of this only 5% are working with a financial planner such as a Certified Financial Planner (CFP) or a Qualified Associate Financial Planner (QAFP). So why the reluctance? Sometimes it can simply be not knowing where to start, or hesitancy surrounding disclosing personal financial information. The key to overcoming this, is finding a professional you can trust and engaging with them to start the financial process.
Regardless of the professional you are working with, the plan should be customized to you as the client, building the plan around you and your life stages, not the other way around. Whether your goal is purchasing a home, being mortgage free faster, building registered savings such as a TFSA or RRSP or saving for your child’s education, it’s our job as professionals to strip away the complexities and help focus in on what’s most important. Often times, young adults will say that there are a lot of unknowns or balls in the air, my answer to that is, let’s consider them all. You’ve heard of farm to table, we usually like to start the planning process with clients prefacing the couch to table approach, meaning if there’s financial conversations or ideas that are talked about, why not explore them all.
Lastly, I think it’s worth noting that a financial plan shouldn’t be static either, it should be updated every two to three years, or sooner if there is a material change in financial or lifestyle aspects. Not all life transitions are treated equal, but almost all with four implications: practical, emotional, family and financial or legal, having a plan will make navigating these changes easier and most importantly, keep you, the client, in center focus.
On behalf of the Pyle Wealth Advisory team, have a wonderful weekend.
Ally Pyle
CIBC Private Wealth consists of services provided by CIBC and certain of its subsidiaries, including CIBC Wood Gundy, a division of CIBC World Markets Inc. The CIBC logo and “CIBC Private Wealth” are trademarks of CIBC, used under license. “Wood Gundy” is a registered trademark of CIBC World Markets Inc.
Ally Pyle is an Investment Advisor with CIBC Wood Gundy in Peterborough. The views of Ally Pyle do not necessarily reflect those of CIBC World Markets Inc.
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