Financial Literacy Month: Advisors Can Help Fill Knowledge Gaps

Beth Graddon

November is Financial Literacy Month, and it’s an important opportunity for advisors to help improve their clients’ financial knowledge and address some of the unique financial planning needs of specific demographics, including women. Specifically, what guidance and education do trends show Canadians need when it comes to financial literacy?

Although data shows that women are less financially literate than their male counterparts on many issues, current legislation and economic challenges place pressure on all Canadians. A 2016 study entitled, Gender Differences in the Financial Knowledge of Canadians, from Statistics Canada highlights how there is increased pressure today for all Canadians to become more financially knowledgeable due to pension plan changes, inflation, risk diversification, and compound interest. Issues that recent federal budgets, election promises, and new legislation bring even more complexity to.

Advisors have an important role to play in improving the financial literacy of all client profiles, but the discrepancies in knowledge outlined in the same Statistics Canada Report that show women are less informed across the board is of even greater concern. As women live about 4.5 years longer than men on average, there are unique financial planning considerations needed to address the fact that a longer period of retirement needs to be funded. Additionally, women have higher disability rates than men, which means that access to funds for long-term care over a greater period of time is a likely requirement. This is all made more challenging by the fact that women’s cumulative lifetime savings are typically lower than men’s due to shorter working lives and lower earnings.

Debt and credit comprehension are an additional challenge for the entire population. A national survey released in October from Rates.ca illustrates the misconceptions many Canadians have about how credit card interest is calculated, as more than two in three Canadians don’t know that interest is calculated daily on the balance, and one in three are somewhat unlikely to make their minimum credit card payment. Plus, 60% admitted that they are not familiar with their credit score.

And there’s similar confusion when it comes to mortgages – 90% were unaware that interest is charged semi-annually on a fixed-rate mortgage, and only 39% knew that the minimum down-payment for a mortgage that doesn’t need to be insured by CMHC is 20%.

Understanding the trends affecting each client demographic and the gaps in their knowledge ensures that as an advisor, you can help educate your client-base to make more informed decisions about the wealth management strategies you employ when planning for their future. Financial Literacy Month is the perfect opportunity to introduce these conversations.

Stay tuned for an announcement about our new Knowledge Gap courses, starting with the first one, Women & Finance,  in the weeks to come.

Additional educational resources: Earn your RWM™ credentials. As a specialist, the Real Wealth Manager oversees the delivery of a goal-based, strategic process that includes multiple stakeholders in the family and a multi-disciplinary team that delivers on financial goals across various lifecycle events. The overriding goal is to build, grow and preserve family wealth after taxes, inflation and fees.

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