Here in Canada, research suggests Canadians are not only struggling with mental health issues due to financial worries but also within $200 of not being able to meet their financial obligations. That’s the very essence of financial vulnerability.
But on World Financial Planning Day, there is good news. A study released today by the global Financial Planning Standards Board found 87% of clients of certified financial planner professionals feel financially secure.
Canadian research consistently finds that working with a financial planner is associated with reduced risk of financial vulnerability across all income levels.
One survey found 72% of those who work with a financial professional, such as a financial planner, aren’t vulnerable compared to 53% of those who don’t receive professional assistance. The data from the Financial Resilience Institute also show higher financial resilience scores among households working with financial planners than households that go it alone.
So, how can we help more people access professional advice?
First, it’s important to understand the barriers they’re facing — and how we can remove them.
One step here in Canada is building a more diverse profession that better reflects the Canadian population. Financial vulnerability impacts Canadians of all backgrounds and walks of life, which is why it’s so important to ensure there is a supply of professional financial planners with a diversity of life experiences and from a wide variety of cultural communities and demographics.
Through research we also know that other barriers include the insistence among some Canadians that they can handle their personal finances on their own, or a belief that they can’t afford to hire a professional to provide them with financial planning advice.
But as investment and tax strategies, along with estate and retirement planning, become increasingly complex, financial planning professionals are increasingly important. These complicated issues are not a matter for chatbots or DIY efforts.
It’s also important to examine the root causes of financial vulnerability. When individuals and households are unable to withstand financial shocks, it’s often due to inadequate preparation, insufficient savings and lack of planning for those financial stresses. In particular, the absence of a safety net can become a huge problem when life throws unexpected challenges our way.
But data from Canada and abroad consistently make clear that professional financial planning can help ease financial vulnerability and empower individuals to take control of their finances.
Financial planning professionals have a holistic understanding of a household’s financial situation. Armed with expertise and experience, they analyze income, expenses, debts and assets, and devise comprehensive financial plans that can help struggling households achieve long-term financial health.
Professional financial planners can also ensure people have greater foresight when it comes to their finances. They help clients anticipate potential future expenses, such as education costs, health care and retirement needs. From there, they can help develop strategies that lead to financial well-being at all these milestones.
In times of economic uncertainty of the type we’re experiencing now, the value of professional financial planning becomes even more pronounced. Economic downturns can be financially devastating, but a well-constructed financial plan can become a road map to navigating even the most challenging financial circumstances.
On World Financial Planning Day, it’s my wish that all Canadians consider the positive role that financial planning can play in their lives. Professional financial planners can help ensure households are resilient — not vulnerable — in the face of economic shocks.
Tashia Batstone is president and CEO of FP Canada.