Boomers lack investment confidence

(October 25, 2005) If you think talking to some clients about retirement planning can be like pulling teeth, you’re not alone. They’re thinking it too. A recent survey found almost 20% of baby boomers find reading financial information as painful as going to the dentist.

While respondents may have been exaggerating, the comparison highlights a serious problem among Canadians between the ages of 40 and 60. The survey, commissioned by Mackenzie Investments, found that 62% of respondents rated their investment abilities as only fair or poor. At the same time, 56% admit they are not saving enough for retirement.

“Financial goals are not met overnight and too many boomers still admit they haven’t planned adequately,” said Charles Sims, president and CEO of Mackenzie Financial. “We’re concerned about this, especially given how important the next ten years are for their retirement planning.”

When asked how they would spend an extra five hours a week, respondents ranked financial research dead last, even after going to work. Perhaps not surprisingly, leisure activities and spending time with family were the most popular choices.

The fact that boomers neither enjoy investing, nor trust themselves to do a good job at it, presents an opportunity for financial advisors. Sixty percent of respondents say working with an advisor will bring superior investment returns, while 50% say professional help will cut down on the stress and anxiety of investing.

“While most Canadians are aware of the benefits of financial planning, it’s clear that many still haven’t fully embraced the focus and decision making they need right now,” adds Sims. “We encourage them to take the first steps in seeking professional financial advice.”

The ever-expanding universe of investment choices has left boomers in a quandary, with 44% saying it has become harder to make investment decisions than it was 10 years ago. Sixty-one percent admitted they did not understand the difference between income trusts and dividend-paying stocks for tax purposes.

When asked to identify the greatest threats to investing success, 29% said not starting earlier, 24% said not understanding choices and 24% said not setting enough aside each year.

If nothing else, an advisor seems to play a key role simply by instilling a savings discipline on clients. Among those without an advisor, 67% of respondents believe they are not saving enough, compared to 47% among those with an advisor.

And while many financial professionals agree investors need to ignore the noise around the markets, investors find it difficult. Thirty percent of respondents said they learned from reading the business section of the newspaper, but 22% said it left them with more questions than answers and 17% found it boring.

Almost half of respondents said they are “somewhat confident” in their ability to choose the right financial advisor for themselves, but 29% said they were not. To address this, Mackenzie has included tools to guide investors in selecting a financial advisor on its website.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com