CANADA S FINANCIAL LITERACY: How Credit Unions Can Seize an Opportunity for Differentiation

Transcription

1 CANADA S FINANCIAL LITERACY: How Credit Unions Can Seize an Opportunity for Differentiation

2 AGENDA Key Opportunities Sweet Spots New Value Propositions

3 KEY OPPORTUNITIES Momentum is coming. Mark Carney, exit interview, April 21, 2013 Copyright Knowledge Bureau, Inc. All Rights Reserved

4 LEADERSHIP: TEACHABLE MOMENTS Financial Literacy: The knowledge, skills and confidence to make responsible financial decisions Leadership: Recommendation #7 Copyright Knowledge Bureau, Inc. Knowledge Bureau, MFA, RWM, DFA- Specialist & Real Wealth Management are trademarks owned by Knowledge Bureau Inc. All Rights Reserved

5 WHAT DO CANADIANS WANT ADVICE ABOUT? Life Events: Demographics, Financial Behaviors, Fees Financial Events: Taxes, Unemployment, Incapacity, Retirement, Sale of Business, Succession, Estates Economic Events: Inflation, Black Swans, Political or Natural Disaster

6 SWEET SPOTS THE ROLE OF THE WEALTH ADVISOR

7 GLOBAL MILLIONAIRES ARE FLOURISHING Will rise by 18 million in the next five years to reach 46 million by the year China: double to 2.4 million India & Taiwan : over half a million Africa: close to 400,000

8 IN CANADA Ranks 8 th in the world for household wealth and 13 th per adult Wealth growth is 3.6% annually One million millionaires Contributes 4% of the top 1% in the world despite having only 0.5% of the world s population Global Wealth Report, Credit Suisse, Copyright Knowledge Bureau, Inc. All Rights Reserved

9 AVERAGE CANADIANS ARE WEALTHY! Average household net worth increased 5.8% to $400,151 Dec. 31, 2012 Canadians are richer than Americans by 5% WealthScapes; Environics Analystics, July 26, 2013

10 ECONOMIC RISK INDICATORS MARCH 21, Real GDP Growth 2.1% 2.3% Nominal GDP Growth 4.6% 4.3% GDP Inflation 2.4% 2.0% CPI Inflation 2.1% 1.8% 3-month treasury bills.9% 2.3% 10-year Govt. Bonds 2.1% 3.4% Exchange (US/C$) Unemployment Rate 7.5% 6.7%

11 SMALL BUSINESS GROWTH IS KEY The key to economic growth in Canada lies in the creation of new businesses...(to) create new jobs, and the new income required to propel our economy forward. Stephen S. Poloz, Governor, Bank of Canada, Sept/13 Copyright Knowledge Bureau, Inc. Knowledge Bureau, MFA, RWM, DFA- Specialist & Real Wealth Management are trademarks owned by Knowledge Bureau Inc. All Rights Reserved

12 GOOD INCUBATION ENVIRONMENT Canada in fact is well positioned to incubate those new businesses: up to 150,000 new businesses may sprout in the next decade. Ernst & Young s G20 Entrepreneurship Barometer, August/13. Copyright Knowledge Bureau, Inc. Knowledge Bureau, MFA, RWM, DFA- Specialist & Real Wealth Management are trademarks owned by Knowledge Bureau Inc. All Rights Reserved

13 WHAT WE HAVE LEARNED How Canadians Use Their Money Stage 1 Non-Discretionary Stage 2 Discretionary Stage 3 Foundational Capital Stage 4 Transitional Capital

14 THE PLANNING PROCESS TAX PLANNING Tax Efficient Income Tax Efficient Capital FINANCIAL PLANNING WEALTH MANAGEMENT

15 WEALTH MANAGEMENT It s About the Family s Whole Plan Specialized knowledge in tax, investment, retirement, succession & estate planning Copyright Knowledge Bureau, Inc. All Rights Reserved

16 RISKS Copyright Knowledge Bureau, Inc. Knowledge Bureau, MFA, RWM, DFA- Specialist & Real Wealth Management are trademarks owned by Knowledge Bureau Inc. All Rights Reserved

17 KEY AT RISK PROFILE: FAMILY BUSINESSES Statistics Canada Survey, 2009 The median net worth of the self-employed was $520,000 in 2009, 2.7 times the median of $195,000 for paid employees. 2.7 million Canadians were self-employed : 16% of the workforce in % were preparing for retirement (building), compared to 85% of paid employees (withdrawing).

18 WEALTH MANAGEMENT REQUIRES AN INTER-FAMILY RELATIONSHIP Planning with Business Owners an excellent opportunity Patriarch is strong advocate for next gens Family balance sheet management is key Financial literacy is the first step integrated services in mass and mass affluent market can identify families who want advice Copyright Knowledge Bureau, Inc. Knowledge Bureau, MFA, RWM, DFA- Specialist & Real Wealth Management are trademarks owned by Knowledge Bureau Inc. All Rights Reserved

19 COMPLEX BEHAVIORAL ENVIRONMENTS PERCEPTIONS OF THE STATE OF WEALTH DIFFER FOR HNW CLIENTS Inherited Wealth Complex family dynamics Self-Made Millionnaires Gatekeepers, High Expectations Corporate Executives Portfolio Risk Management is Key

20 THE NOTIONS OF WEALTH Spectrum Group 2013 Retail investors PNW <$100,000, before PR: commonly believe it takes $1 million to be rich. The UHNW - $5 million to $10 million to be wealthy. UHNW Inheritors: see themselves as less wealthy. UHNW Entrepreneurs: investors who say their success is based on hard work, education, running a business and luck tend to perceive themselves as more wealthy.

21 BEHAVIORAL FINANCE... BIGGEST WORRY FOR THE VERY RICH? That their children will squander the family fortune. -Survey by Sensus Research of 165 Canadians worth more than $10 Million, for TrueWealth Study, 2006, T. Stenner Group.

22 WARRANTED... 50% of the under-50 s use social networking for investment advice. Cisco s Internet Business Solution Group, March 30, 2011

23 THE FATE OF INHERITANCES A study released in July 2009 by the Bank of Montreal found that of those 65 and older who have already received an inheritance, three-quarters didn t speak to a financial advisor about the windfall. Of those 45 to 65 who had received an inheritance, 80 per cent didn t speak to an advisor.

24 NEEDS Lack of tax efficiency in investment and retirement planning erodes capital Under insurance for accrued value in assets, personal health risk Sale of business issues loss of investment opportunities for tax exempt capital Loss of investment opportunities in complex structures: Partnerships, Corps and Trusts Multi-year tax strategies must include alternative investments, Strategic Philanthropy

25 MORE COMPLEX QUESTIONS How do I avoid high income brackets and surtaxes on my final return? What is the value of accrued capital gains in my taxable asset base? Will I be required to report my offshore properties? Am I subject to US estate taxes? How will currency fluctuations affect the soft costs I need to fund for my vacation property?

26 WHO WILL PROVIDE THOSE ANSWERS? Copyright Knowledge Bureau, Inc. Knowledge Bureau, MFA, RWM, DFA- Specialist & Real Wealth Management are trademarks owned by Knowledge Bureau Inc. All Rights Reserved

27 NEW VALUE PROPOSITIONS: WHAT WILL CLIENTS PAY FOR? BMO Nesbitt Burns Survey, August 2012 Trustworthiness & honesty (89%) High Level of Knowledge (88%) High Level of Experience (83%) Track Record & Availability (76%) Advisor Confidence Level (75%)

28 NEW VALUE PROPOSITIONS INTEGRATED ADVICE, INTER-GENERATIONAL

29 AN IMPORTANT SHIFT From individual to family From income to capital From one generation to the next

30 FROM THIS Client Accountant Lawyer Investment Advisor

31 TO A TEAM APPROACH Living Benefits Specialist Life Insurance Specialist Business Valuator Income Tax Specialist YOU! Wills & Estates Lawyer Benefits and Pensions Specialist Business Insurance Specialist Investment Income Specialist Retirement Income Specialist

32 REQUIRED: ONE STRATEGIC PLAN All professional advisors All family members Joint Decision-Making

33 THE NEW ROLE OF WEALTH ADVISORS Educator Financial Literacy Tax Planning Financial Planning Wealth Management Advocate Trigger Events Multiple Stakeholders Strategic Planning Steward Knowledge-Based Behavioral Finance Transition of Wealth Copyright Knowledge Bureau, Inc. All Rights Reserved

34 THE NEW CLIENT EXPERIENCE: Multiple Stakeholders; Joint Decision-making Copyright Knowledge Bureau, Inc. All Rights Reserved

35 THE AHA MOMENTS PRACTICE MANAGEMENT More Time is Required To Meet & Know the Stakeholder Teams To Understand what Clients Need & Value To Have Deeper Conversations To Provide Peace of Mind Copyright Knowledge Bureau, Inc. All Rights Reserved

36 RELATIONSHIP MANAGEMENT & FINANCIAL LITERACY COLLABORATIVE LEADERSHIP Forge relationships with accountants and lawyers they understand where the money is. LIFELONG LEARNING This is about the heirs - Enable family governance and succession conversations, face-to-face. ACCOUNTABLE DELIVERY Schedule the time to provide relevant, understandable guidance. Copyright Knowledge Bureau, Inc. Knowledge Bureau, MFA, RWM, DFA- Specialist & Real Wealth Management are trademarks owned by Knowledge Bureau Inc. All Rights Reserved

37 SOARING HIGHER IN SUMMARY: YOUR OPPORTUNITY Copyright Knowledge Bureau, Inc. All Rights Reserved

38 THE KEY: FOLLOW THE MONEY 150,000 new business owners in next decade Heirs will possess the capital to leverage into new equity ventures Multi-Stakeholder Relationships & Joint Decision-Making is Required Copyright Knowledge Bureau, Inc. Knowledge Bureau, MFA, RWM, DFA- Specialist & Real Wealth Management are trademarks owned by Knowledge Bureau Inc. All Rights Reserved

39 YOUR COMPETITIVE ADVANTAGE August 31, 2013: Credit Unions Rank First in Customer Service 8 th year in a row. Ipsos Best Banking Awards. December 31, 2012: $134.6 Billion on deposit representing 9% increase over Provincial deposit guarantees: unlimited in BC, AB, SK advantage over federal institutions Copyright Knowledge Bureau, Inc. Knowledge Bureau, MFA, RWM, DFA- Specialist & Real Wealth Management are trademarks owned by Knowledge Bureau Inc. All Rights Reserved

40 THE BANKS Banks do not dominate the insurance business Do not have uniform strength regionally DBRS Ratings, 2011 Copyright Knowledge Bureau, Inc. Knowledge Bureau, MFA, RWM, DFA- Specialist & Real Wealth Management are trademarks owned by Knowledge Bureau Inc. All Rights Reserved

41 SWEET SPOTS Recurring fee income Investments, insurance Commercial lending Especially to next generations of home owners, business owners Retail Deposits Deep relationships with members & their networks Copyright Knowledge Bureau, Inc. Knowledge Bureau, MFA, RWM, DFA- Specialist & Real Wealth Management are trademarks owned by Knowledge Bureau Inc. All Rights Reserved

42 FOCUS ON FINANCIAL LITERACY: NEW VALUE PROPOSITIONS Best & Most Timely Information: Ongoing Education Best Networks: Business and Social Best Practices: Principles, Rules for Accumulation, Growth, Preservation & Transition Copyright Knowledge Bureau, Inc. Knowledge Bureau, MFA, RWM, DFA- Specialist & Real Wealth Management are trademarks owned by Knowledge Bureau Inc. All Rights Reserved

43 PEACE OF MIND...IT S PRICELESS. Member Relationships: From Finite to Infinite

44 Thank You St. Mary s Road Winnipeg, MB