TD survey suggests need for advisors: Relatively few Canadians have a financial plan they follow religiously.
A recent TD survey on investor sentiment finds that, despite having financial goals, nearly a third of Canadian investors do not follow a financial plan. Only one in five have a strategy and stick to it each time they make an investment decision. Overall, 32% didn't have a strategy at all or rarely followed it. Only 21 % had a strategy they followed “all the time.”
"It really struck me how small percentage who had a clearly defined strategy that they stick too," said Bob Gorman, chief portfolio strategist at TD Wealth. “A lot of people aren't following a plan systematically. This points to the need for a solid planning regime. There is a clear need for a more systematic approach to investing, a real need for good financial planning for a broad swathe of the middle class population. There is a real case for better financial planning."
This is not to say the average investor doesn't have goals. The TD Investor Insights Index found that that "funding retirement and achieving financial independence" are the most important long-term investment goal for Canadians. Travel is also important, as is paying off debt and buying a house (a short-term and long-term goal for about one in 10 Canadian investors). But almost half of Canadian investors struggle to understand the different investments that are available today and aren't sure where to go to get trustworthy advice. “The middle class has problems understanding investments,” says Gorman.
In terms of products Canadian investors buy, mutual funds continue to be the most popular type of investment in Canada. Mutual funds are held by more than two-thirds of investors. GICs and term deposits are owned by 51% of Canadians. Interestingly, 48% expressed they would like to own individual stocks and shares. Real estate also remains a popular investment, with nearly four out of 10 investors saying it will always be beneficial. Only 14% mentioned ETFs, a number that seems oddly low. "I think that goes back to lack of knowledge ...[the] lack of knowledge is a hurdle for the mass market," says Gorman.
The survey also found that the average investor has become more risk-averse since the Great Recession. Thirty-three percent would describe their tolerance for risk as low. This fact is reflected in the fact many Canadians expressed an interest in owning gold, while 23% of Canadian investor assets are cash. “When you have a cash figure of 23%, that's significant," says Gorman.
"It really struck me how small percentage who had a clearly defined strategy that they stick too," said Bob Gorman, chief portfolio strategist at TD Wealth. “A lot of people aren't following a plan systematically. This points to the need for a solid planning regime. There is a clear need for a more systematic approach to investing, a real need for good financial planning for a broad swathe of the middle class population. There is a real case for better financial planning."
This is not to say the average investor doesn't have goals. The TD Investor Insights Index found that that "funding retirement and achieving financial independence" are the most important long-term investment goal for Canadians. Travel is also important, as is paying off debt and buying a house (a short-term and long-term goal for about one in 10 Canadian investors). But almost half of Canadian investors struggle to understand the different investments that are available today and aren't sure where to go to get trustworthy advice. “The middle class has problems understanding investments,” says Gorman.
In terms of products Canadian investors buy, mutual funds continue to be the most popular type of investment in Canada. Mutual funds are held by more than two-thirds of investors. GICs and term deposits are owned by 51% of Canadians. Interestingly, 48% expressed they would like to own individual stocks and shares. Real estate also remains a popular investment, with nearly four out of 10 investors saying it will always be beneficial. Only 14% mentioned ETFs, a number that seems oddly low. "I think that goes back to lack of knowledge ...[the] lack of knowledge is a hurdle for the mass market," says Gorman.
The survey also found that the average investor has become more risk-averse since the Great Recession. Thirty-three percent would describe their tolerance for risk as low. This fact is reflected in the fact many Canadians expressed an interest in owning gold, while 23% of Canadian investor assets are cash. “When you have a cash figure of 23%, that's significant," says Gorman.
