Canadian advisers struggle with sidelined cash

Tue Jul 23, 2013 11:10am EDT
 
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By Andrea Hopkins

TORONTO (Reuters) - When financial adviser Lee Helkie sits down with clients who are afraid to invest their money, she walks the same uphill path her peers have faced since 2009: how to get investors off the sidelines before it is too late.

"People aren't aware that markets have rallied, and the fear is still there because the news of the economy is so prevalent," said Helkie, an 18-year industry veteran at Helkie Financial & Insurance Services in Toronto.

When the financial crisis rocked markets in 2008 and 2009, many investors yanked their money out of stocks and never returned. Awaiting a better time to re-invest, they kept their funds in cash or money market investments.

But nearly five years later, global stock markets have regained strength, interest rates are at rock bottom, and clients whose money remains on the sidelines are running out of time to increase their retirement funds and recoup losses.

The problem is huge. Some $5.9 trillion is sidelined in the United States and another C$975 billion ($943 billion) in Canada, according to global investment manager Franklin Templeton, which includes liquid products like Guaranteed Investment Certificates and money-market funds as cash.

"People are stuck in crisis mode and disconnected from what is actually happening," Franklin Templeton consultant Kevin Jeffries told a group of financial advisers trying to help clients get back on track toward their financial goals.

Will Britton has seen the same thing in his practice in Kingston, Ontario. People have been sitting on cash for four or five years and realizing they must do something to build their nest eggs. But the confidence they had in 2006 is gone, and clients no longer aim for a magic number.

"When I'm talking objectives, it's not about an annual return anymore, it is about what they want to do in retirement," said Britton, who has been a financial planner for seven years, just long enough to have weathered the financial crisis.   Continued...