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(January 16, 2007) Findings from an Ipsos Reid study released Tuesday state that many Canadian boomers are confused or ill prepared for retirement.

Conducted on behalf of BMO Financial Group, the study, which polled Canadians between the ages of 45 and 60, found that across the board boomers would rather spend their time planning activities other than retirement.

Ontarians were among the study’s worst offenders. More than half of the province’s respondents spend more time planning diets than retirement, and just under half devote more hours to planning home renovations. Although 73% of Ontario boomers have an RSP, compared to the national average of 69%, 52% of these Ontarians claim their RSP is their only financial plan.

This carefree attitude has Judy Thomson, director of sales at BMO Mutual Funds, worried. In Ontario, 73% of boomers have an RSP, compared to the national average of 69%, yet 52% of these Ontarians consider their RSP to be their only financial plan.

“Without a more long-term and comprehensive financial plan that goes well beyond registered investments, boomers are at risk of not being prepared to fund their retirement,” Thomson said. “Twenty-two per cent of Ontario boomers think they’ll have 20 years or more in retirement, yet over half claim that they don’t have a financial plan or that their plan is ‘in their head’ — clearly, a new approach is required.”

As for other provinces, the study found that boomers in Saskatchewan and Manitoba had the highest proportion of savings; Alberta boomers were the most eager to volunteer for charitable work or start up a small business during retirement; and boomers in Quebec, where almost half the respondents expect their retirement to last fewer than 10 years, lagged behind the national average in savings.

BMO believes the results don’t contradict a previous BMO–Ipsos Reid research study that found that 91% of Canadian boomers agreed that having enough money to reach their goals in retirement requires a lot of planning and advice.

“While boomers acknowledge that planning is important, it appears that most are reluctant to plan for something that is perceived to be so far down the road, especially when they have many other priorities to deal with,” Thomson said. “Whether they plan to continue working through their traditional retirement years, volunteer or hit the road and travel around the world, we need to help them conceptualize what they want their retirement to look like so that they can plan ahead to fund their future desired lifestyle.”

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BoC maintains overnight rate

(January 16, 2007) The Bank of Canada announced that it is maintaining its target for the overnight rate at 4.25%. The operating band for the overnight rate is unchanged, and the Bank rate is steady at 4.5%.

The Bank said inflation has remained in line with its expectations from October. Final domestic demand in Canada remains strong. CPI inflation is slightly lower than projected, and core inflation, slightly higher.

Canada didn’t follow the global economic trend of robust expansion because the United States slowed during 2006. With weaker U.S. growth, output growth in Canada decelerated, likely averaging about 1.6% in the second half of 2006. This was largely due to reduced U.S. demand for building materials and motor vehicles, the Bank said.

The Bank projects that with adjustments in American demand in the auto and housing sectors stabilizing, economic growth in Canada will pick up to about 2.5% in the first half of 2007 and that the economy will continue to operate near its production capacity throughout 2007 and 2008.

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Positive test for TSX’s next-gen trading system

(January 16, 2007) TSX Group said lab tests of its new equities trading engine, code-named TSX Leapfrog, have been very positive.

Leapfrog is designed to be a state-of-the-art platform with world-class messaging capabilities with response times in the single-digit-millisecond range, matching trades in microseconds and full round-trip response times comparable to, or better than, any equities exchange group in the world.

According to TSX, during a recent round of lab tests, Leapfrog delivered speed of order-matching in microseconds, combined with near perfect system availability.

“This new engine has been in development by TSX Technologies since January 2005, and it builds on our long history of providing leadership in high-technology trading to all customers that use our markets,” said TSX Markets president Rik Parkhill. “Our technology enhancements announced over the last twelve months are aimed at providing best-of-class solutions to all Canadian capital market participants.”

Leapfrog is scheduled for a phased rollout beginning in late 2007.

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Pension fund trustees not monitoring proxy votes, survey finds

(January 16, 2007) A survey by the Shareholder Association for Research and Education released on Tuesday concludes that a majority of private-sector, pension fund trustees are giving complete discretion for proxy votes to investment firms that manage their funds.

SHARE said regulators have identified proxy voting as one of the key responsibilities of pension fund trustees. Nonetheless, 73% of the firms participating in the 2006 survey indicated that they had been given complete discretion to vote the proxies for more than 85% of the pension fund assets they manage.

Laura O’Neill, SHARE’s director of law and policy, stresses that pension plan trustees are accountable to the plan-holders, not the firms that manage the plans.

“For trustees, the failure to manage or guide outside investment firms on how to vote proxies is a very serious matter. To not do so, leaves them open to potential liability and possible charges of negligence. There is a very real danger that they could be found in violation of the Standard of Care provision found in federal and provincial pension benefits legislation,” she said.

Ken Georgetti, CEO of the Canadian Labour Congress, echoes O’Neill’s sentiments and warns that the current system is ripe for abuse, leaving plan-holders to pay for things like excessive executive compensation.

“Golden parachutes and other forms of excessive executive compensation are a drain on shareholder value and threaten the retirement savings that ordinary Canadians have invested in the stock market,” says Georgetti. “Sadly, however, far too many CEOs and directors treat them as birthright rather than something to be earned. Shareholder proposals here and elsewhere offer a means whereby the people who actually own the company can restore some sanity to the boardroom.”

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Markets divided over new accounting rules

(January 16, 2007) According to the results of a capital markets survey and report released by Standard & Poor’s Ratings Services, the Canadian capital markets appear divided on Canada’s choice to adhere to international financial reporting standards.

S&P said international financial reporting standards, collectively known as IFRS, are a set of controversial accounting rules that were adopted by the EU in 2005 but not without many contentious debates that continue to this day. Canada has chosen to abandon its system of generally accepted accounting principles in favour of IFRS.

Standard & Poor’s warns that investors who don’t educate themselves on IFRS risk misinterpreting changes to reported numbers as being a product of the economic realities of a business when in fact those changes might be caused solely, or in large part, by conversion-related accounting policy shifts unrelated to a company’s core activities.

S&P said that Canadian business leaders were well aware of the conversion to IFRS and its potential impact to its reported number. Managers noted that the cost of IFRS preparedness will have a substantial impact on its bottom line, rivalling the cost of Sarbanes-Oxley compliance in certain cases.

On the other hand, S&P found that financial-statement users (ranging from institutional investors to buy- and sell-side analysts) tended to be unaware of the change to IFRS or, at best, were aware of the change but were unfamiliar with IFRS pronouncements and seemingly indifferent to its potential effect on their perceptions of earnings quality, valuations and overall financial health.

“The change in accounting standards has certainly garnered our attention. While there is no consensus view on exactly what IFRS’s impact will be on our capital markets, what is clear from our survey results is that many CFOs will be closely monitoring its effects on their reported numbers — a telltale sign that maybe we, as users of their financial reports, should be doing the same,” said Kevin Hibbert, the Canadian director of financial reporting.

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(01/16/07)