Briefly: “TFSA well known, thanks to ads” and more news

The advertising campaigns appear to be paying off, at least in bringing the TFSA to the attention of the investing public, according to a survey by TNS Canadian Facts.

The poll found that 79% of Canadians were aware of the TFSA, falling just shy of the awareness of RESPs (84%). The RRSP remains the king of financial structures, with 94% awareness.

“The combination of advertising by government and financial institutions has translated into a high awareness of the new investment vehicle and good initial uptake,” said Rhonda Grunier, vice-president of TNS Canadian Facts and director of the TFSA study.

But just because Canadians have heard of the TFSA, that doesn’t mean they are buying into it. The poll found that so far 14% have taken advantage of the program and made a contribution. Another 36% said they were likely to open an account this year.

Not surprisingly, lower income households are less likely to open an account, at just 28% of respondents with a household income below $35,000. Among those saying they would not likely be opening a TFSA, 41% said it was because they lacked the financial resources.

Despite the opportunity to earn tax-free investment returns, 47% questioned the wisdom of encouraging people to save in troubled economic times, rather than encouraging them to spend. The paradox of thrift appears to be well understood. Another 35% said the tax-free nature of the accounts will contribute to a federal budget deficit.

The education process is not yet complete, however, as 27% said they did not understand the difference between the TFSA and an RRSP.

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Corporate earnings wane

Canadian corporate earnings fell in the fourth quarter of 2008 to $65.4 billion, down 16.3% month-over-month, according to StatsCan. That’s the largest decline in earnings in 16 years.

The financial services industry pushed that overall average higher, with profits in the sector falling 21.8%, compared to a decline of 14.4% for non-financial sectors.

Financials still managed to earn $15.8 billion in the quarter, while non-financials posted a combined profit of $49.5 billion. The banking sector was hit by trading losses, with earnings falling 35.3% quarter-over-quarter, to $3.8 billion.

But finance was far from the worst sector to be in. Energy extraction saw profits fall 41.2% to $7.1 billion, as the prices of oil and natural gas declined. Refiners were hit even harder, as profits fell 47.3% to $2.3 billion.

For the full year, Canadian corporations earned $283.6 billion, up 5.4% from 2007. Most of those gains came in the sector that posted the worst declines in the final quarter. The oil and gas extraction industry saw its full-year earnings rise 43.2% to $37.8 billion.

But it was a rotten year all the way through for banks, as full-year profits fell 20.2% from 2007, to $22.4 billion.

On Wednesday, StatsCan reported that private sector capital investment would fall 13.1% in 2009, while public sector spending is expected to rise 9.5%.

Read: Capital spending to fall, despite stimulus.

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Jobs trump markets in list of concerns

Stock market returns and their impact on portfolios are among the top concerns Canadians have in 2009, but take a back seat to employment worries, according to a poll conducted for Edward Jones.

Thirty-two percent cited job security as their top concern, with the markets trailing at 19%. Healthcare and saving for retirement were the top concerns for 15% and 14%, respectively.

“It is not surprising the economic news is fueling job worries, but Canadians are worried almost as much as their American neighbours,” says Michelle Kay-Scott, senior retirement planning specialist for Edward Jones in Mississauga, Ontario.

Healthcare became a bigger concern for people over age 50, however, with 25% saying it was their top worry. Conversely, job security was more important for Canadians between the ages 25 and 34, with 50% saying it was their top concern.

The firm conducted a similar poll in the U.S., fining 38% were worried about their jobs, followed by the markets at 23% and healthcare at 20%.

(02/26/09)