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Many younger Canadians are turning to self-directed investing to help save for the future, a trend that advisors should see as an opportunity to educate them on the markets, while tying those investments into a broader wealth management plan.
A recent Royal Bank of Canada (RBC) survey shows 48 per cent of participants aged 18 to 34 started self-directed or do-it-yourself (DIY) investing during the pandemic and 87 per cent were doing it to achieve long-term financial goals and future financial security (86 per cent).
“They aren’t all jumping in and out of the market looking for instant gains – they’re investing for the long term,” says Lori Darlington, chief executive officer of RBC Direct Investing.
Interestingly, Ms. Darlington says the survey also shows about three-quarters of these younger investors believe it’s good to invest some money with an advisor as well as on DIY platforms.
“They see value in both,” she says. “There are a lot of newer investors who are still very much building their knowledge and expertise in making investing decisions.”
More advisors now “recognize and embrace” the fact that many of their clients are investing on their own online, as well as using their service, and they can support these hybrid investors by improving their investment knowledge, Ms. Darlington says.
Jason Heath, certified financial planner and managing director at fee-only planning firm Objective Financial Partners Inc. in Markham, Ont., has several clients who trade online and also work with a portfolio manager.
He sees some benefits in people managing some of their own money, especially as the costs of DIY investing have come down. It also helps them understand how markets work better.
Mr. Heath believes advisors can support these clients by showing them how their DIY portfolios fit into their larger financial plans.
“As long as your portfolio is well-diversified, the investments that you buy and own may be less important than some of the other considerations, like what type of accounts should you be opening up and investing in such as a [registered retirement savings plan] or [tax-free savings account],” Mr. Heath says.
Advisors can also act as coaches to prevent clients from making poor investment decisions – like panic selling in a market downturn or buying stocks based on hype – that could have an impact on their long-term financial goals.
“The ups and downs of the stock markets lately and during the pandemic are a reminder of the psychological impact of investing,” he says. “Sometimes, an advisor can prevent a DIY investor from making novice investing mistakes. Not everyone is meant for DIY.”
– Brenda Bouw, special to The Globe and Mail
Must-reads from Globe Advisor this week
‘Zero-sum game’ for advisors as baby boomers decumulate
Decades of helping investors accumulate wealth are in the midst of a reversal as the wave of baby boomer retirement forces advisors toward decumulation. For every advisor who’s going to be the recipient of clients consolidating their wealth, there’s going to be another or two who will see those assets withdrawn – creating a shift within the industry. Jameson Berkow reports on how this trend will affect advisors and what strategies they should deploy when decumulation is not as straightforward as baby boomers work and live longer.
Many investors are not taking advantage of TFSAs
More than a decade after the tax-free savings account (TFSA) was created, many Canadians are still confused about how the account works. Only half are aware that the investment vehicle can hold not only cash but stocks, bonds, mutual funds, or exchange-traded funds, according to a recent survey. Gillian Livingston speaks with advisors about how investors can use TFSAs effectively to maximize investment returns.
How to play health care sector as surgeries come back
Challenges such as burnout, hospital staff shortages and supply chain bottlenecks still plague the health care sector, while any new COVID-19 variant could also be a wild card. But shares of medical technology companies are set to bounce back after two lean years as delayed and needed elective surgeries get back on track as infections ease. Adam Mayers looks at the potential winners among medical equipment companies and service providers based on the fundamentals.
Home bias prevails despite foreign investing spree
Canadian investors are sticking to a small pool of domestic stocks, which account for just 3 to 4 per cent of global capital markets, even though government data shows investments in foreign securities ramped up last year – hitting a new record. Experts say many advisors’ failure to implement global investment strategies is hurting portfolio returns in the long term. Dale Jackson digs deeper on why diversifying with foreign equities should make up a larger part of overall investments.
What you and your clients need to know
How long will the commodity euphoria last?
The rally in commodities prices has led to latecomers looking at the red-hot sector as those who made early bets reap the rewards. Is it too late for investors watching from the sidelines to join? One solution is investing in stocks that stand to benefit indirectly from the rally but haven’t reached the boiling point yet. David Berman considers the alternatives on this play.
What does socially conscious investing mean in times of war?
The Ukraine-Russia crisis is bringing up deeper questions about how to be socially responsible in investing and whether investors really want to put their money where their values are. Erica Alini reports on how many investors want to make sure their portfolios are free of stocks linked to Russia, but identifying and pulling investment from global companies operating in the country can be more tricky.
Birdwatching becomes a hot new hobby for seniors
Seniors are using birdwatching as a way to get out and socialize safely. The pandemic and wave of people heading into retirement has led to a 30 per cent jump in the number of people submitting data to the online bird checklist platform eBird Canada between 2019 and 2020. This increased another 14 per cent last year. Kathy Kerr looks at the rise of birders in Canada.
– Compiled by Globe Advisor staff