RRSP season brings lower contributions, advisors report

(March 5, 2003) “Slow and low.” That’s the succinct phrase Denzil Feinberg of Feinberg Financial in Winnipeg uses to describe this year’s just-completed RRSP season. While not all advisors report the same experience, there’s no question that weak markets have put a dent in contribution levels for 2002.

Yesterday, the Investment Funds Institute of Canada reported that, based on preliminary statistics, net mutual fund sales for February, traditionally the height of RRSP season, would be in the $150 million to $450 million range. That’s the first time since last April that the industry has not experienced net redemptions. This year’s February figures are a far cry from the same month last year, when sales topped $4 billion.

“The fears of the average investor have affected my overall RRSP sales for this season,” says Allan Johnson of Money Concepts in Prince George, B.C. “The dollar volume is down about 20% from last year, our best year ever.”

“I suspect that RRSP contributions will be low relative to other years and that those contributions will favour short-term savings accounts rather than investments,” adds Kerin Lloyd of Assante in Whitby, Ontario.

Not all advisors are reporting lower RRSP sales. John Hope of Allied Financial Services in London, Ontario keeps monthly investment activity statistics and says the first two months of 2003 were almost identical to 2002.

“We’ve had some reluctance, but nothing widespread,” Hope says. “A lot of our clients understand this is a continuation of a buying opportunity that has lasted a heck of a lot longer than we thought it would.”

Johnson agrees, and says he’s advising clients to focus on the current opportunities, “as they may be the best we will experience in our lifetimes.”

Lloyd says some of his clients realize that stocks are relatively cheap and want to rebalance their portfolios in favour of equities. “I discourage this because we never know what markets will do in the short term and they will be unhappy if their timing does not work to their advantage,” he says. “I counsel clients to keep their eye on their long-term plan.”

For Fred Smith of Raymond James in Saskatoon, the message for clients is discipline and back to basics. “In times like this, we’re going to rebalance and take advantage of low markets,” he says. “The market is still a good place to be for the portion of your investment that’s growth oriented.”

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Smith says the three-year bear market has been a reality check for many clients. “The good thing is people now know what their risk level is,” he says. “If you talked about markets going down a few years ago, people’s eyes just glazed over. Now they know.”

Advisors who rode the bull market are taking their lumps as well. “The mistake some advisors made in the late 1990s was taking credit for a market that none of us had anything to do with,” Hope says. “And if you take credit for performance, you also have to take the blame.”

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Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca

(03/05/03)

Doug Watt