A recent poll undertaken by Ipsos Reid confirmed what we have been talking about for the last few months; Canadian investors haven’t got their mojo back and are spending more time at the bank than playing golf with their investment advisors.
Of the almost 500 advisors who responded to the survey, 69% admitted that their clients were pessimistic about the capital markets. Interestingly, the most bearish investors were those that looked to an advisor at a bank or credit union for guidance. When asked why their clients were so gloomy, the answers included fears about a slowdown in China (57%); the possible breakup of the Eurozone (43%) and the price of oil (35%).
But it isn’t the possible bankruptcy of Spain that’s the real worry. It’s what it means to long-term financial plans that keeps people awake at night. According to advisors, two-thirds of clients are afraid of seeing some of their capital vanish before their eyes, while only a few less talk about not having enough for retirement.
In another survey published this year, also by Ipsos Reid, Canadians were asked about their financial priorities. Only 25% identified saving for retirement as their priority compared to 49% who selected debt management as the number one goal.
Given these concerns, it is no surprise that there is more than $1 trillion on the sidelines; that mutual fund sales have been sluggish (see our latest Insight report http://investoreconomics.com/issue/insight-october-2012-monthly-update); that the rate of growth of the deposit market has slowed (see our recently published Deposit and Fixed Income Advisory Service http://investoreconomics.com/issue/deposit-and-fixed-income-report-fall-2012); and, that trading volumes in both the online and full-service brokerage channels have stalled (see our latest Brokerage and Distribution Advisory Service report http://investoreconomics.com/issue/retail-brokerage-summer-2012-section-4).
Saving and investments, while important in the long-term, have lost out to spending less and paying down debt in the short-term. Those advisors that are balanced sheet-focused—rather than investment-focused—are likely to be busy in the coming months and well able to maintain relationships. On the other hand, those advisors that only deal with the top left hand side of the household balance sheet—that is, liquid investments—could be in for a chilly winter as savings are used to pay down debt and disposable income is diverted away from longer term savings goals. Posted by Keith Sjogren Keith@iei.ca.