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3 million Canadians to stop using a financial advisor in 2021

Report shows a generational shift with three times as many millennials planning to stop working with their financial advisor as opposed to hiring one in 2021

To say this has been an interesting year for retail investors would be an understatement. Between Reddit traders pumping stocks like Gamestop and AMC to the dismay of Wall Street, to the Robinhood revolution which has riled industry regulators — it’s clear the last year has been downright transformative for investors globally — and Canada is no exception.

In fact, new research from global comparison site Finder.com finds that about 1 in 10, or three million Canadians, plan to manage their own investments and ditch their financial advisor in 2021. A further 4.7 million Canadians are seriously considering taking an active role managing their future investments without the aid of a financial advisor.

Who is going to make 2021 the year of DIY investing?

Millions of younger Canadians, specifically millenials and gen Z, are jumping on the ‘do-it-yourself’ train. This new crop of investors is younger, more risk tolerant and willing to ride the turbulent waves of the stock market to achieve lofty gains (or staggering losses).

Our report shows three times as many millennials plan to stop working with their financial advisor as opposed to hiring one in 2021, as compared to boomers, who are almost twice as likely to hire one than stop using one.

What are the reasons driving this huge generational shift toward DIY investing?

Demographic Breakdown

Age:

  • Age is a major factor when looking at which Canadians are turning away from the advice of a financial advisor.
  • Nearly 1 in 3 (33.7%) Millennials say they plan to stop working with their financial advisor, or are seriously considering it — the most of any generation.
  • Millennials are followed closely by Canada’s youngest generation Gen Z with 31%, then in third are 21% of Gen X saying they will stop working with their advisor (or are seriously considering it).
  • Least likely to make the move to DIY investing are Boomers with just 11% saying they would fire their advisor or even think about it.

Gender:

  • Men are more likely to stop working with their financial advisor with 30% of them saying they either plan to start managing their own investments or are considering doing so in 2021, as compared to just 20% of women.

Relationship Status:

  • One factor to note is married Canadians are the group most likely to have used an advisor (65.66%) so it’s no surprise this group has the most people saying (29%) they would fire or consider firing their advisor in 2021.

Region:

  • Top three provinces planning to ditch their financial advisor are Alberta (13%), Ontario (11%) and Quebec (10%).
  • When we include those who are seriously considering not using an advisor, Alberta and Quebec are in top spot at 30%, followed by Saskatchewan 29%, and Ontario (25%).
  • Just 3% of Nova Scotians said they plan to stop using a financial advisor in 2021, the lowest number of any country in the Province.

What is driving this shift in investing behaviour?

While the media has been all over covering the stock market exuberance and new retail investor hype, there hasn’t been much talk about how this transformation in investing behaviour might affect financial advisors.

More than 13 million Canadians (43%) reported never having worked with a financial advisor, so nearly half of Canadians may be struggling to come up with the money needed to invest with one. Even still, Finder’s recent report on household savings explains Canadians have been saving on average 5x the typical pre-pandemic savings amount (just over a quarter of their disposable income or 27%) — which goes a long way to explaining the money flooding the stock market and real estate investing.

These additional funds in household budgets is leading many people to do away with their advisor and manage their investment portfolio, with the two most cited reasons for dropping a financial advisor being saving money on fees (54%) followed by “having more control over my money” (42%).

One quarter of Canadians (25%) cited ‘feeling knowledgeable about how to meet my own investment goals’ and ‘not wanting to ask someone to make investment decisions/transactions’ as reasons to turn DIY about their financial future.

Surprisingly, convenience was only a factor for a little over 1 in 10 (21%) of Canadians, making it the lowest ranked reason for why people would stop using an advisor.

Demographic Breakdown

Gender:

  • Only real gender difference into ‘Why’ to go it alone is that men generally tend to feel more knowledgeable about their investments (29% vs 22% for women)

Age:

  • It seems each generation has different reasons for wanting to ditch the financial advisor and manage their own investments;
    • Boomers feel most knowledgeable about their investments (29%) of any generation
    • Gen X is most focused on saving fees (56%)
    • One quarter (25%) of Millenials most value convenience of newer online/mobile investment options
    • Gen Z want to have control over their investments more than any other generation (48%)

Income:

  • Interestingly, Canada’s highest income earners (120k +) are most concerned about saving on fees (64%) and also feel most knowledgeable about their investments (29%)
  • While, Canada’s lowest income earners (<20k) are most concerned about wanting to have more control over their money (48%)

Region:

  • Canadian’s were motivated by very different reasons to become a DIY investor in 2021;
    • Manitobans want to save the most on fees of any other province (79%), followed by Ontario (58%), BC (53%) and Alberta (51%)
    • Nova Scotians feel most knowledgeable about their investments (29%) and how to meet their goals
    • Ontarians want province most likely to say they want to have control of their money (47%), followed by Nova Scotia at 46% and BC at 42%
    • B.C. Most enticed by not having to ask an advisor to make financial decisions for them (30%) — highest across country

        Top 3 Tips for the DIY Investor

        With nearly 5 million Canadians either planning to or seriously considering ditching their financial advisor to manage their own investments in 2021 it’s safe to say many Canadians could make a few missteps along the way.

        1. Educate yourself — Before you dive into purchasing investments like stocks or ETFs you need to understand that the account type should dictate your choices. If you trade within a Registered Retirement Savings Plan (RRSP) or Tax Free Savings Account (TFSA) and stay within your limits, your profits won’t be taxed. Whereas trading in an unregistered account means you will be subject to capital gains tax. Check out Finder’s guide to account types on the pros and cons of each.
        2. Pick the right platform — Some new stock trading platforms offer low or even no fees on trades, the ability to buy Crypto (if that’s of interest), others may have more built-in research and resources to help you make better decisions. Think about your investment goals and pick the platform that best meets your investing style.
        3. Diversify — With all the hype about how much money newbie investors have made in high-flying tech companies, or even ‘meme’ stocks like Gamestop, what often gets lost is that diversification is what protects most people from any market correction or swift sentiment change that could see them losing thousands. Do research on how many stocks you should own before you invest all your savings on the next trend.

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