What advisors can do to spark more money talk in client families
While calls for greater financial literacy among Canadians have revolved around educational efforts, in-class training, and the classic hallmarks of formal schooling, RBC is emphasizing the myriad informal ways we all learn. In their efforts for financial literacy month, RBC Wealth Management has emphasized the importance of the family as a forum for financial education. If parents and grandparents fold a daily dose of financial education into the time they spend with their kids, they could make a meaningful difference in Canadians’ financial literacy.
Stephanie Dean, manager, financial literacy at RBC Wealth Management, spoke about why her focus this November have been on how families talk about money. She spoke to why there are often gaps in family conversations and highlighted some of the steps advisors can take to open and facilitate family financial education.
“Learning is constructed, it’s built piece by piece over time as young people interact with the world and reflect on their experiences. So starting when kids are small, whether it’s at the grocery store or doing holiday shopping, being able to explain how you’re buying something and why you’re doing it that way,” Dean says. “Tying some things together, like explaining why the hydro bill is higher in the winter. There are natural events in everyday life where we just need to pause and think to add in the technicalities and to share how we think and feel about it.”
While those small explainers can be very helpful, there is always the ‘why’ challenge that comes with explaining things, especially to young kids. They might ask why you’re using your credit card for a purchase, and you’ll answer that you’re building credit and earning points. They might keep asking why to those underlying reasons in a way that ends up forcing you to admit what you don’t know. Dean says that it’s important to keep information age appropriate and slowly add layers of complexity over time, helping kids to gradually build a meaningful understanding of finances.
The risk, Dean says, of not teaching kids these pieces of financial knowledge is that they’ll learn things the hard way when they become more independent. Sometimes those missteps can be a learning opportunity, but Dean believes a stronger foundation of knowledge can help protect against the worst consequences.
While parents play the most important role in Dean’s particular area of focus, she notes that advisors can be essential players in family conversations. Because of an advisor’s unique connection to a family and their role in helping the family through key life stages, they’ll be aware of the milestones that could open up wider conversations about financial literacy. Those could include discussions about registered accounts, the KYC process, or even securities selection.
Rather than encouraging a DIY approach, Dean believes these educational efforts can help the next generation of investors know what they know and know what they don’t know. Without this knowledge young people may feel frozen or lack the confidence to make decisions. Despite advisors’ own limitations of time and energy, Dean believes they can and should make the effort, if for no other reason than as a leg up in the great intergenerational wealth transfer.
“Money is changing hands as people sell businesses, as people pass on. There are different changes to family structures, and whether it's the spouse or the next generation or the grandkids that are receiving gifts, we are hoping to retain those relationships with those families,” Dean says. “In order to do that, I think we need to start early, not in a critical transition like a like a business sale or a critical moment when somebody's ill or unwell, but we need to start building those relationships ahead of time, so that we continue to be the family's source of the family's chosen professionals to work with them all the way through.”
