SVP says advisors should see this as an opportunity to take a holistic approach
Generation X is financially ill-equipped for retirement because of the cost of living and student loans.
A survey by Franklin Templeton Investments Canada found that more than a quarter of gen-Xers haven’t saved a cent for retirement, while nearly half (47%) claim their income is too low and more than a quarter (29%) insist their expenses are too high to save.
Matthew Williams, senior vice president, said this situation is an opportunity for advisors to prove value and establish Xers’ investment goals and objectives. Even if individual clients are not valuable, he said, it potentially offers a route to other family members’ wealth and assets.
Williams said the state of generation Xers’ finances comes down to a number of factors.
He said: “Their debt-to-income ratio is probably as high as it’s ever been in historical terms. I think second to that, gen X are evidently having children later so that has probably been delaying the capacity to start saving for retirement and the third thing is, I do think there is a ‘I need it now rather than saving for the future’ mindset.
“Generation X, in my view, needs to take a really close look at their discretionary spending so as to think about their propensity to put more money away for retirement.”
Williams said that the first thing a planner can do is to help them set, prepare and live within their budget. The opportunity to compound savings is still there – for gen X and millennials – as they set targets for retirement. The old adage of putting clients first remains paramount, argued Williams.
He said: “Maybe not every client is necessarily going to be profitable to that advisor but the way I think about it, I’m a financial advisor and I’m dealing with a married couple that are in their early 40s, trying to raise children perhaps, the advisor really has an opportunity to try to be holistic.
“So any advisor dealing with a gen X to a millennial should be asking questions around the circumstances that your parents or grandparents find themselves in because you never know as an advisor when you are going to be afforded the opportunity to manage those assets that transfer from one generation to the next, and to be holistic around the family unit is a pretty cool tactic for advisors to employ.”
Williams did highlight one area of concern in Canada, which he feels generation Xers and millennials can ill-afford to ignore.
He said: “The one thing that really concerns me about Canada is the lack of thought or the under-preparedness of individuals to think about their healthcare. We have universal healthcare here in Canada but I’m not convinced we are going to have that for ever.
“Can or should individuals be putting money into some kind of healthcare spending account or a TFSA in order to have that money for a rainy day if they really need to get some expenses that are not covered by any insurance or system that we live in?”
