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Strategy 2024

Opportunities, speedbumps and planning ahead

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With the impact of technology and fintech, speedbumps like inflation, interest rates and the bumpy ride of the Canadian economy, combined with transforming demographics and delayed or re-defined retirement trends, Edmonton’s money professionals agree and caution: 2024 is not your grandfather’s wealth management strategy.

While savvy numbers crunchers are prone to crunch numbers, forecast and advise, the 2024 economy combined with social and personal trends are potent driving factors which percolate through the dry and complex money talk.

“Currently, about one third of the population is between their mid-30s and late-50s, the prime working years,” notes Komal Kaur, founder and financial consultant at Edmonton’s Bibek Private Wealth Management. “It translates to about 12.7 million people. It’s also important to understand that approximately 425,000 Canadians reach the traditional retirement age (65) every year. For the first time, seniors now outnumber children in Canada. There are nearly 7 million Canadians 65 and over, compared to 6 million Canadians 14 and under.”

By 2031, more than 25 per cent of Canadians will be over the age of 65 – a significant factor for effective 2024 wealth management.

“The economy and the trend of delayed retirement can shape individual’s attitudes towards wealth management by influencing their risk tolerance, investment choices and overall financial planning strategies,” she says. “Canadians are having families later in life and living longer. The desire or the ability to stop working may decrease while children are still at home or in need of their parent’s financial assistance with the cost of post-secondary education.”

With so many options, and due to digital sophistication, combined with current and future financial risks and stability, more and more people are embracing the need for solid and effective wealth management planning.

“Consumer wants, needs and expectations in wealth management have evolved in response to societal shifts, technological advancements and changing economic landscapes,” Kaur points out. “Today, consumers seek a seamless digital experience, demanding user-friendly interfaces and the convenience of managing their investments through mobile apps and online platforms. Personalization remains paramount, with a growing desire for tailored financial advice that aligns with individual goals and values. Transparency in fees, investment strategies and ethical considerations, particularly in the realm of responsible investing, have become focal points.”

“People are starting to realize how fundamental and crucial financial planning is, “says Brett Phare, market lead and senior private wealth specialist with CWB Wealth Management, the Edmonton-based bank made up of 10 banking, lending, wealth, and trust companies and serving clients in Western Canada and in other provinces. “A vital part of the wealth management planning and strategy is ‘the number.’ The details and specifics of the planning are crucial but what is the number the person needs and expects to retire?”

With the economy, inflation, private social trends and other key factors, he emphasizes that people are paying more attention to financial situations and the effects of longevity.

Longevity must factor in important speedbumps like inflation, as well as the social and personal aspects of aging, retirement, post-retirement and second-career opportunities to maximize effective wealth management strategy.

“When inflation rises, the value of money decreases,” explains Stephanie Mann, AVP and private wealth specialist with CWB. “We are now facing the impact of the highest rate of inflation we have seen in over 40 years. With inflation being one of the biggest risks to retirement savings, people must be extra cautious when deciding on an experienced and qualified wealth manager to protect and grow their portfolios through proper diversification and asset allocation.”

Of all the influencers impacting wealth management, Kaur underscores that inflation is significant when it comes to consumer approaches to wealth management planning. Inflation refers to the general increase in the price levels of goods and services over time, leading to a decrease in the purchasing power of money.

“It erodes the purchasing power of money,” she explains. “Suppose you have $100 today and the inflation rate is 2 per cent. In one year, inflation diminishes the purchasing power of the $100 to $98. This means that the same amount of money will buy fewer goods and services in the future. Inflation affects both savings and investments. If the rate of return on investments or savings is lower than the inflation rate, the real value of money decreases over time.”

She also explains that personal lifestyle factors also significantly impact wealth management.

“The perception of retirement is evolving. Some people are viewing retirement not as a complete exit from the workforce, but as a transition to a different type of work. This shift can influence how people approach wealth management, emphasizing flexibility and adaptability. With a longer working life, individuals may have an extended time horizon. It can be an extended period to accumulate savings and affect risk tolerance and the type of investments they choose.”

Trending shows that prolonged, post-retirement careers are proving to be a common factor of today’s wealth management.

“The uncertainty of the economy and heightened inflation has encouraged more people to engage in some type of work after they formally retire,” Mann says. “Extended careers like consulting, directorship or part-time work and other opportunities, with no planned end dates are possibilities.”

As a result, people are looking for diverse investment strategies to secure their financial future in times of economic uncertainty as well as prolonged careers.

“We notice clients maintaining a more growth-oriented investment portfolio for longer than ever before and since income is not a priority in the early years of retirement, planning a growth-oriented portfolio is often appropriate.”

Kaur accentuates that the economy, combined with the trend of delayed retirements, has created new dynamics for wealth management.

“A myriad of factors needs to be considered. From economic conditions to societal shifts, planning for a more extended and potentially evolving retirement period, wealth management strategies need to be flexible, adaptive and comprehensive to address multifaceted challenges and opportunities.”

The experts agree. Although technology continues to redefine most aspects of personal finances, from everyday banking, e-commerce, investments and wealth management, some things – like the private, personal touch – may never change.

“Wealth management is becoming much more accessible to the mass market than it was before, and there is a lot of easy to access information out there,” Phare cautions. “But clients still want in-person, high-touch experiences and relationships. The harder the economic environment, the more clients will gravitate towards the advisor model. When markets go up, everyone can make money, because a rising tide lifts all boats. This is why advisors have been questioned about their worth. When the markets are down, that’s where the good wealth management firms and advisors shine.”

Looking ahead to 2024, he projects that there will be an increasing wealth management trend for a dividend strategy to capture the up market and cover on a down market. Phare admits that, although the hybrid model is here to stay, in-person experiences will be the difference maker.

“It’s easy to text, call, email, but going into turbulent times, clients will need the extra reassurance of being able to physically see and interact with their advisors.”

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