Date Posted: Oct 28, 2007

2007 Household Balance Sheet Report

We are very pleased to announce that the 2007 edition of Investor Economics’ Household Balance Sheet Report will be available in the next couple of weeks. This study continues a tradition first established in our inaugural 1993 edition. That report introduced the notion of the Household Balance Sheet as an analytical framework that would permit providers of financial services in every major corner of the marketplace to consider the entire playing field of retail financial services by tracking the aggregate of all households through time and into the future. The widespread appeal of the Household Balance Sheet for senior executives, researchers, regulators, strategic planners and marketing specialists is derived from the fact that the framework is at once a simple yet powerful analytical tool. The basic underlying approach set out in the early work has been extended to each and every one of the eight reports produced over the past 15 years. But, like the industry itself, the content and analytical detail has evolved and grown with every edition. Just as importantly, the evolution of the report reflects Investor Economics’ commitment to deepening the rigor of the data, the metrics and the research that underpins this report and everything we do. In every Household Balance Sheet Report, we strive to pinpoint emerging trends and themes and bring the strategic significance of these to the attention of readers. There are two key examples in the current edition. The first is residential real estate. The 2007 Household Balance Sheet Report brings to fruition the output of many months of effort to produce the first database that tracks the value of residential real estate held by Canadians. In presenting a 10-year history, with data for 35 local markets divided into every main housing type, we have created a potent building block in understanding the importance and growth of residential real estate to Canadian households. Provincial balance sheets offer another example. In the past few years, we have greatly stepped up our focus on gathering more and better provincial data. Our capabilities have expanded to the point where a discussion of the provinces now warrants its own stand-alone section of the Household Balance Sheet Report. Throughout the report you will see a number of refinements and improvements in the depth of data and level of detail. A couple of areas warrant particular attention. The first of these relates to the subject of flows. In this report you will find that flow and market effect estimates and projections are identified for total financial assets, the financial wealth market, the fee-based continuum, and all delivery channels. Household credit detail is another area to note. Related to the personal credit component, we are very pleased to announce that Investor Economics has entered into a special arrangement with Equifax Canada, one of the nation’s leading compilers of personal credit information of Canadian households. This arrangement adds further detail and precision to the national and provincial balance sheets, along with historical trends. We believe that it enhances our ability to conduct deeper and more informed analysis and research on the credit side of the Household Balance Sheet—an area of increasing importance at Investor Economics. Timeliness of information ranks high in importance with improvements of data detail. While the Household Balance Sheet Report is a biennial event, the gathering and compilation of data is a continuous exercise. National and provincial balance sheets are now produced on a semi-annual basis, and in many cases quarterly data is also captured at these points. Also, a very special reminder that around mid-2008 every purchaser of the Household Balance Sheet Report will receive a complete package of updated numbers and rebased projections using actual 2007 year-end numbers as the base period. In terms of approach, the key goal has been to strive for a more strategic presentation by weaving the main balance sheet trends and themes that will play out in the marketplace. Retirement and the High End are identified as the two main strategic topics in this report. In both cases we have adopted our typically comprehensive and multi-faceted approach, looking at the opportunities and challenges for providers from the standpoint of demand, competition and emerging products. While there is an element of overlap between these solitudes, the facts in our Household Balance Sheet Report speak for themselves. Currently, 39% of Canadian households and almost $1.5 trillion are controlled by those over 55. Ten years out that will be 46% of households and $3.9 trillion. In the High End, 470,000 households control $1.6 trillion or 66% of all financial wealth. Ten years hence these numbers will be $4 trillion or 74% of financial wealth. Success or failure for the large number of players vying to succeed in the financial service industry of the future will be dictated by the way they respond to opportunities, competition and strategic challenges in either or both of these spheres.
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