Article June 29, 2020

Educating clients: the key to weathering crises

The stock market is volatile, people are concerned about the economy and a recession is looming. Let’s face it, times are tough right now. According to advisors Olivier Giroux and André Lacasse, the clients who stay calm despite the roller-coaster rides are often those who have been “taught well.”

A recent study by the HEC Montréal Retirement and Savings Institute found that the index measuring Canadians’ knowledge of their retirement income system is about 38%.[1] In addition, only 10% of Quebecers believe they have strong financial literacy skills, while nearly half say their financial knowledge is poor.[2] Yet there is considerable evidence that financial literacy has a direct impact on financial behaviour, and therefore people’s wealth.

Educate to empower

Both advisors are well aware of this. Olivier Giroux, a financial security advisor and mutual fund dealer representative at Services Financiers O. Giroux, a firm attached to Sun Life Financial, says the first step is acquiring an in-depth understanding of clients. In fact, advisors have an ethical obligation to do so, especially when a client has limited financial literacy skills.

“This is central to my practice,” says Giroux. “Even before I am hired, I always meet people several times. It’s important to take the time to lay the groundwork for a strong relationship, to understand what’s needed and review the situation.” Clients must feel involved in achieving their financial objectives and in planning how to achieve them.

Giroux notes that a lot of time must be spent raising clients’ awareness. “I show them how vital it is to have foresight, to create a financial cushion to be able to deal with the unexpected and to hold good insurance products, for instance.” He emphasizes advisors benefit just as much from this approach. With a sound financial plan in place, advisors can avoid emergency management of their clients’ assets in financial crises. “All you need to do is review the plan with them, rather than simply react to events.”

Most of his clients have stayed calm despite the current circumstances, so this approach is clearly working. “They gradually built up their knowledge while working with me and know that a few months is not long when you’re investing for retirement over decades,” says Giroux.

Show, don't tell

André Lacasse, a financial planner, financial security advisor and mutual fund dealer representative at Lacasse Services Financiers, draws the same conclusion as Giroux. He also thinks personal finance basics should be taught more in elementary and high schools, as this knowledge may be critical when children become adults.

As part of his practice, Lacasse systematically educates clients about financial planning issues. “People hate being sold to. They prefer receiving help when they buy something,” he says. “The same is true in our field. We need to explain and to provide plans as well as clear, quantified predictions. Clients accept the plan I propose because it’s the best solution for them. They can see this by analyzing the documentation I provide, which helps them decide which financial products to buy.”

He uses forecasting software as well as relevant information provided by financial institutions, fund managers and organizations like Retraite Québec, such as graphs showing stock market and investment trends over the years. The past doesn’t guarantee the future, but it provides a basis for reflection.

“There’s no point just saying the stock market will recover in the end,” says Lacasse. “You need to back up what you say with data. The worst thing to do is say something without backing it up. It’s a sure way to lose credibility.”

Lacasse says that only a few of his clients sold their assets when the markets fell a few weeks ago. “That’s because they have good financial knowledge, and knew not to panic.”