Advisor and author Shamez Kassam gives his view on what more Canadian advisors need to be doing
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Canadians are facing a multitude of financial challenges right now. Interest rates remain at record-low levels, incomes are languishing, economic growth in Canada is stagnant, and decent market returns are increasingly hard to find. When you also consider that market volatility is expected to rise and that nearly 50% of Canadians don’t understand how much they need to save for their retirement, one thing becomes clear: solid financial advice has never been more important.
“We’ve come a long way from the the market lull back in March ’09 and markets today are not fundamentally cheap any more, they’re expensive,” says Shamez Kassam, an advisor and author of new book Your Money’s Worth: The Essential Guide to Financial Advice for Canadians. “Also, the world is now increasingly complex, especially on the geopolitical side of things. There is lot of uncertainty around both the policies of the new U.S. administration and the political situation in Europe. There are a lot of things going on and people need advice.”
Many Canadians view their advisors as being purely investment experts, but Kassam believes that advisors should be adopting a holistic approach and ensuring that “all of the rooms in their client’s financial house are in order”. That means providing services around insurance, will and estate plans, retirement plans and saving strategies. “On the investment side, with all the uncertainties right now, I think we’re going to see more and more volatility in the markets and that’s where the behavioural coaching aspect of an advisor becomes key,” Kassam says. “More advisors are using the holistic model and there are a lot of great advisors out there, but we, as an industry, need to start telling our narrative a little better.”
Going forward, Kassam believes that finding decent returns is going to be increasingly difficult. In his new book (released on March 9th) Kassam refers to a study which anticipates that returns in the next 20 years are going to be lower than in the previous 20, and that volatility is likely to increase. Kassam expects particular challenges in fixed income. In order to ensure adequate returns going forward, Kassam recommends a dividend growth strategy. “I think that will work well over time and, if we do get more inflation down the road, clients will be somewhat protected with growing dividend streams,” Kassam says. “Advisors can also look at different fixed income alternatives, such as private lending if it makes sense for the client.”
“My approach has always been to tell my clients we need to get three things right: understanding their risk tolerance, making quality investments, and keeping it simple.”
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