December 5th, 2017

Is financial overconfidence hurting Canadian investors?

The cost (and opportunity) of poor financial literacy

Over half of Canadian adults failed a financial literacy test, showing the dire need for better financial education. What does that mean for you?

In a recent survey conducted by Ipsos on behalf of, 78% of Canadians claimed to be financially literate. However, more than half of participants failed a 15-question personal finance test, and of the 43% who were successful, most of them just eked out a passing grade. Furthermore, Millennials, a huge market and opportunity for financial services professionals, had the lowest pass rate compared to Baby Boomers and Gen X’ers, while also being the most likely to rate their financial literacy as excellent.

Of the areas included in the test, the weakest was mortgages. Which considering the current housing climate, is definitely an issue. Canadians could potentially find themselves entering a volatile housing market, without truly understanding what they’re getting themselves into.

The survey helps make the case for better financial education and access to professional advice. That lack of understanding is just a prime example of the value of an advisor. In fact, it’s been shown that investors working with a financial advisor over a 15-year period ended up with 3.9 times higher asset levels than non-advised investors.

What does it mean for you?

There’s an opportunity for advisors and financial planners to demonstrate the benefits of working with a financial professional. To help individuals better understand their finances and to prepare for their future.

In our ever-changing digital age, this is an opportunity for you to take an active role as not only a financial advisor or planner, but as an educator and coach. Encourage your clients to ask questions, be involved, and take ownership of their finances. Take that extra step in building their confidence with you and your long-term relationship.

Another thing to consider is writing regular blog posts or sending newsletters. They’re great ways to continue educating your clients, strengthening those relationships, and potentially even catching the attention of potential new customers. You can write about topics including saving for your child’s education, investing for retirement goals, protecting your business with insurance, or any other topic relating to finance benefiting their lives.

What does it all mean going forward?

If nothing else, this shows the need for, and value in, professional advice. There’s a huge opportunity for financial advisors and planners to step up and help clients secure their financial future, however the overconfidence also proves there may be an uphill battle to win over clients. But, taking those steps will help you develop stronger, longer-lasting client relationships.

Ready to kickstart your career in financial services? Check out the Canadian Investment Funds Course and the Life License Qualification Program, and begin helping Canadians reach their financial potential.

Want to test your mutual fund knowledge? Try this quick IFIC quiz.