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COVID-19 : Addressing the Urgent Needs of Canadian Mass Investors

Mass investors make up the majority of Canada’s investment population, yet the near-term wealth-planning needs of many are not being supported during the pandemic.

Whether it’s managing a changing work environment or needing to care for loved ones, for most of us, our lives have been profoundly disrupted by COVID-19. Amidst all the upheaval, it’s mass investors—those whose investments total less than $100,000, who are perhaps living paycheque to paycheque, and who are likely the most worried about lost income and cash flow—who have the most to lose. Frighteningly, most Canadian investors (81 percent [1]) fall into this category.

The 2019 Canadian financial capability survey by the Financial Consumer Agency of Canada suggests that, while some mass investors may have a financial planner, for most, access to advice is fragmented, and tends toward long-term horizon planning, such as for retirement, product selection, and asset allocation; or for life events, such as home purchase or career loss. It doesn’t account for the current needs of investors, who may be experiencing illness, the need to care for a spouse or parent who is ill, or job loss. Many are struggling to pay their bills or are taking on debt.

This is significant, because more than two-thirds of mass investors either feel they don’t need professional financial advice or believe they don’t have enough assets to get advice. They tend to fall between the cracks in today's inflexible service continuums and product-oriented regulatory frameworks. As a result, last year, only 41 percent of Canadians received professional financial advice [2]. This indicates that a majority may have been unprepared for the current market crash and have had little professional help to guide them through this crisis.

And we already know this group struggles to save, carries too much debt, and is dealing with unaffordable housing in many cities.

Supporting resilience today for better outcomes tomorrow

Although the stock markets have rebounded quickly from the recent lows, a sustainable long-term recovery will depend on containing the virus. At Deloitte, we have developed cases for economic recovery under different scenarios [3]. In the best case, there could be a short, deep recession followed by a quick recovery. In a more severe scenario, with repeated outbreaks, we could see a prolonged and significant drop in economic activity lasting well into the second half of 2021.

Mass investors must carefully navigate these volatile times to preserve their savings while also positioning their portfolios for the recovery. Yet, immediate concerns around bills and debt are overshadowing longer-term investment and retirement goals, and work insecurity is impacting benefits. Leaders in the wealth-management industry are already tackling this challenge, and an area that is top of mind for them is helping mass investors weather this storm, focusing in particular on how these consumers are being served today.

There is an urgent need for a better way to help Canadian mass investors navigate the short- and medium-term decisions relating to employment and income, government programs and support, cash flow, credit and debt management, and draw down from or reacting to the market impact on their investments. Whether it’s insurers or group providers, retail banks or wealth arms owned by banks, we urgently need financial brands to step into the void and help address the questions that are keeping Canadians up at night. We believe there is a clear need for coordinated and personalized advice, and that the market could use a more human-centric approach to supporting the financial decisions Canadians must make in the short and medium term.

There are also missed opportunities, in the advice being offered, when it comes to linking to available resources and addressing immediate needs. Retail banks are helping Canadians defer their mortgage payments, figure out how to lower the interest rates on their loans, and how to minimize the impact on their credit scores. But they aren’t necessarily making the links to government assistance programs beyond facilitating payment. And wealth managers are sending out updates to their clients urging them not to do anything drastic in a volatile market, but they may not be thinking about the shorter-term cash-flow needs that many people have right now.

Finally, there hasn’t been much attention given to people’s work life and the unprecedented impact COVID-19-related shutdowns have on jobs, both in the way people work and the stability of that work. The most recent employment statistics are startling: March saw the unemployment rate increase by 2.2 points to 7.8 percent, the largest single-month increase since 1976, when comparable data became available. Between March 15 and 21, the number of Canadians who worked less than half their usual hours grew by 800,000, and the number who worked no hours grew by 1.3 million [4].

There is an opportunity in the market for all stakeholders—government, industry, and not-for-profit—to come together and find the best ways to help this group. Deloitte believes that the large players, such as Canadian banks and insurers, are in a great position to find a solution. We believe this is the right time to think about service offerings and the best ways to advise the Canadian mass investors, and in doing so, set them up for success as Canada recovers.

We need all parties actively engaged to help Canadians recover and thrive. As part of our contribution, we’re working on creating more robust tools related to financial wellness and we’ll be sharing tangible ways of incorporating mass-market offering into wealth advice. If you’re working through the short- and medium-term ways to better serve Canadians, or are looking for ways to link your services in ways that truly meet people’s needs, both in the workplace and at home, please reach out to us. Send us your thoughts and we can continue the conversation on what this means for the Future of advice.

[1] SI Research, Canadian Investment Funds Industry: Recent Developments and Outlook

[2] Financial Consumer Agency of Canada, Canadians and their money: Key findings from the 2019 Canadian Financial Capability Survey

[3] Deloitte, Recovering from Covid-19: Economic cases for resilient leaders 18-24 months

[4] Statistics Canada, Labour Force Survey, March 2020

 

Contacts 

Matthew McWhirter
Senior Manager, Consulting
Tel : 416-775-8642

Kamal Virk 
Senior Consultant, Consulting
Tel : 416-830-1371

Gagan Bhatia 
Manager, Consulting
Tel : 416-607-1035

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