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The role of the financial manager
A Statistics Canada survey in 1999 pronounced that the median net worth of the average Canadian is $81,000. An individual’s net worth is the equity they have or, put in another way, the assets they hold less the debt they have. Given that this figure is distorted because the average net worth of Canadians includes the 10% of Canadians who own 53% of the total assets in the country, there is more than half of Canadians who have less than $81,000 in net worth.
Yet, paradoxically, a significant amount of the direction given to investment advisors by corporate Canada is to concentrate on the high net worth clients. Does this mean that those people with a net worth of $100,000 or less have less need for financial planning? No. In fact, some of their needs may be greater. However, their ability to satisfy these needs may be limited. These people still need to save money for retirement and worry about providing for their children’s education or care for their elderly parents.
They have to be even more effective in their financial planning and must be more focused. Perhaps the most important factor for these Canadians is the willingness to educate themselves in the art of finance. Financial planning is now being taught by most high schools. These important concepts can continue through an individual’s entire life. Much like most professionals who have accepted a life long learning program, Canadians should accept and welcome the opportunity to plan for their future in a proactive rather than reactive way. Why not take control of your finances instead of worrying about your financial affairs?
There is ample information on the Web to help educate and places to ask the right questions—for this is really the focus that should be taken. It is not always important to know all the answers. What is important is to know what you want and where you want to go in your own particular financial plan. Where are your concerns? What makes you stay awake at night? What problem can’t you solve? Education allows you the ability to know where to look and be on the road to help solve some of your problems.
In these most uncertain times, financial planning and sound investment planning is still valid regardless of the size of your asset base. Concepts such as spousal RRSP, income splitting and dollar cost averaging are important concepts for any individual.
With more than 50% of all Canadians with a net worth of less than $100,000 there is a very large role that investor advisors and financial planners can play for mid-income Canadians. They cannot only help educate their clients concerning their finances, but also help them with their questions and give direction. Take control of your life and learn what questions you need to ask and start planning your financial life now.
Joyce Smith is president of JA Smith & Associates Inc. Certified General Accountants and Certified Financial Planners. The firm offers financial and tax planning advice for both individuals and business.
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