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(September 25, 2008) The current upheaval in global financial markets may be cathartic, forcing a painful but necessary restructuring of the system, according to Bank of Canada Governor Mark Carney.

While the U.S. government wrangles over a bail out for its distressed banking sector, Carney suggested that other nations may need to undertake similar measures.

“In this environment, the U.S. government’s initiative to buy distressed assets is critically important,” he said. “The plan announced by Treasury Secretary Paulson and being developed through discussions in the U.S. Congress is bold and timely.”

Canadians should not be too worried, though, as Carney also points out that domestic financial services firms are well capitalized and should stand up well as the tempest rages.

“There is one constant on which Canadians can rely. The Bank of Canada will not deviate from its relentless focus on its monetary policy mandate to achieve low, stable and predictable inflation,” Carney said in a speech to the Canadian Club of Montreal on Thursday. “Events beyond our borders have important influences on the outlook for inflation in our country. They must be considered in tandem with domestic factors, including the strength of domestic demand, the evolution of potential growth, and the health of our financial system.”

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Investors still fond of funds

(September 25, 2008) Canadian mutual fund investors continue to rank the product tops in terms of reaching their household financial goals, according to the annual poll conducted for the Investment Funds Institute of Canada (IFIC).

The 2008 edition of the survey found 78% of Canadians are confident about their funds, edging out their primary residence, which garnered 75% confidence. Guaranteed investment certificates received 64% support, while 55% were confident about direct holdings in bonds and stocks.

While funds were tops, the confidence level has slipped since last year, when 83% of respondents expressed confidence. The overall economic slowdown has affected the other asset classes as well, with the primary residence slipping four percentage points from last year.

“The survey results reinforce the mutual fund product as an investment of choice for Canadians,” said Joanne De Laurentiis, president and CEO of IFIC. “This does not mean the industry should be complacent — nor has it been. While mutual funds have built-in diversification, the industry has developed products to help Canadians protect capital, especially as many change from a savings mode to the need for post-retirement income.”

Surprisingly, the shaky markets of the past 12 months have left a great number of investors unperturbed, with about three quarters saying they had not changed their investment style. Among those who did change course, 57% did so to minimize losses, while 21% took the opportunity to buy. Another 15% tried to do both.

The majority of fund investors (81%) employed the services of an advisor, compared to 83% in 2007, a statistically insignificant variance. Of those who used an advisor, 37% said they listened to their advice, but made the decision on their own, while 9% said they just did what they were told by the advisor. About half said the transaction was made “together” with the advisor.

About 47% of adult Canadians own mutual funds.

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FPSC reforms board

(September 25, 2008) The Financial Planners Standards Council has announced changes to its governance structure aimed at giving “a stronger voice to the public interest.” The composition of the board of directors will require a majority of director seats to be held by CFP professionals, but also reserves a seat for a representative from the broader public.

“Our new board structure gives CFP professionals direct input into the future of their profession,” says Cheryl Bauer Hyde, CFP, current board chair. “They now have the opportunity to put forward the brightest from their own community to best represent them and their perspective.”

The public representative for this year is Toronto Star writer Ellen Roseman.

“I constantly hear from my readers about their experiences with financial planners. I hope to play a role in helping to raise the standards for this evolving profession,” says Roseman. “As a board member, I can speak for the public interest in financial planning and also explain the rationale for the CFP credential to the public.”

The new format of the board will rely less on the FPSC’s member organization, which will be allowed to elect three board members from amongst themselves.

(09/25/08)