Canadians’ overall financial confidence has dropped 11 per cent in the last year and trust in the economy is declining, according to a new report.
IG Wealth Management’s fifth annual Financial Confidence Index, which tracks and reports on Canadians’ overall financial confidence through 10 survey questions, has found that Canadians aged 35 to 54 reported the largest decrease in confidence, down 17 per cent from 2021.
“While Canadians are concerned about volatile markets, inflationary pressures and rising interest rates, interestingly, many remain relatively confident about the state of their personal financial situation,” said Christine Van Cauwenberghe, Head of Financial Planning at IG Wealth Management.
“It was their concern for the overall economy, and where things could be headed, that was primarily responsible for the decrease in their overall financial confidence, with most Canadians believing the country is currently in recession.”
The Financial Confidence Index also showed Canadians who work with a financial advisor had financial confidence levels 28 percent higher than those who didn’t.
“Much of the concern Canadians are expressing about their financial situation derives from focusing too much on short-term volatility and media headlines related to higher inflation and interest rates,” Van Cauwenberghe said. “Although those issues can have an immediate impact on an individual’s budget, a financial advisor can help you understand the long-term implications and advise you as to whether or not you need to make any adjustments to your long-term plan.”
Financial advisors can use planning software to provide more clarity as to how and when their clients may be able to achieve their goals, whether that be retirement or paying for a major purchase, Van Cauwenberghe said. She noted that it’s during times like these that people without financial advice can make rash decisions that can be difficult to fix later on.
“You need to look at your financial goals holistically and take a longer-term approach to your finances than simply looking at daily fluctuations in the market. In some cases, you may need to make an adjustment … in other cases, your advisor may simply tell you to ride out the economic downturn and keep doing what you’re doing,” Van Cauwenberghe said.
“Without an advisor, it’s a bit of a guess, which is where the stress comes in. You simply don’t know whether or not you’ll be okay.”
A qualified financial advisor takes a holistic planning approach to how they provide advice while learning about their clients as a person and taking into consideration their personal goals and aspirations, Van Cauwenberghe said.
“Everyone can be an investment genius when the markets are going up and everything is increasing in value. The real trick is creating a plan that will get you through the tough times as well,” Van Cauwenberghe said.
For many financial planners, helping their clients during market downturns is some of the most meaningful work they do.
“The best advisors proactively reach out to their clients to assure them that things will work out in the long term, or if they need to make any adjustments, how to approach that,” Van Cauwenberghe said. “Where clients are feeling uneasy, financial planners can ‘stress test’ a client’s financial plan to give them the confidence they need that they will be okay even if there are market fluctuations.”
There’s no better or worse time to start investing, although Van Cauwenberghe suggests the sooner the better. The longer someone is in the market, the more opportunity they have to let their investments grow.
“If you are thinking of investing, you should consider ‘dollar cost averaging,’ which means investing smaller amounts over a period of time, as opposed to trying to guess the absolute best day to invest,” Van Cauwenberghe added. “Investing is more of a habit as opposed to a one-time event.”
If you are thinking of investing for the first time or would like to build financial confidence and set some financial goals, reach out to a local IG Wealth Management advisor to get started.
