As a mortgage broker, we know you’re always looking to strengthen and create longer lasting relationships with your clients. One way to add value is to spark discussions above and beyond their borrowing needs. For example, discussions on the benefits of saving, investing and preparing for retirement will give clients a headstart on the road to achieving financial freedom.
In fact, the two topics go hand-in-hand – a strategic approach to borrowing can provide interest savings and cash flow improvements that your clients can direct – in whole or in part – toward their savings and retirement goals, thus helping to improve their personal balance sheet.
As the effects of the pandemic linger, many Canadians have a more bleak outlook on their financial security and what their future retirement may look like. At the same time, younger generations are more eager to learn about investing and begin saving for their retirement.
A recent study by asset manager Schroders found that Gen Z generally started contributing to their retirement savings at 19, while millennials started saving at 25. While it’s great to see younger generations saving early, the study found that it’s fuelled in part by increased anxiety surrounding the possibility of a retirement crisis, especially as the cost of living increases.
As a trusted financial expert, you can share these financial tips with your clients to add value to their borrowing experience and get them on the path to financial peace of mind.
Start now
The most important advice about saving for retirement is to get started as soon as possible. Remind your clients that it’s never too early to contribute to a retirement savings plan and put it into action. The earlier they start saving, the better. With time on their side, the sooner your clients start saving, the less they will need to set aside each month due to the power of compounded growth, achieving their savings goals more readily than those who put it off.
Automate savings
Suggest setting up automatic contributions plan, ideally timed to coincide with their pay dates. Help your clients review their monthly expenses and decide how much they can comfortably contribute to their retirement savings account. Most banks have the option to set up a pre-authorized contribution (PAC), often from as little as $50 a month so they can “set it and forget it.” With periodic check-ins with their investment advisor, your clients can enjoy growth in their retirement savings with minimal effort. As time goes on, you can suggest incremental increases to those automatic contributions to maximize the power of compounding.
Cut spending in small ways
Help your clients find areas in their budget where they can reduce their spending, and invest the difference instead. For example, if your client is used to buying lunch at work, suggest packing meals from home. A common suggestion is making coffee at home instead of buying that latte from the coffee shop every day.
They don’t have to go cold turkey – even bringing coffee or lunch from home a few days a week will allow them to still indulge in the present while saving for the future. They’re also more likely to stick to the plan by having a more balanced approach. Help clients lay out their fixed expenses and non-negotiables while focusing on the variable ones, and see what’s left. Finding small areas to save today can lead to large savings down the road.
Check for employer matching programs
Ask clients whether their employer offers a matching program for their retirement savings plan (RRSP) or pension plan contributions. For example, an employer may offer to match 50% of employee contributions up to a maximum amount (3% to 5% of pay is fairly standard for these programs). That means for every dollar an employee contributes to their RRSP or pension plan, the employer will contribute a given percentage (up to the maximum amount).
Automatically deducting contributions from one’s payroll is the simplest way for your clients to pay themselves first. Indeed, financial experts agree that employer matching programs are one of the most powerful and lucrative savings tools available. If this is an option for your client, encourage them to not leave any money on the table and take full advantage of the match.
Deal with Your Debt
Encourage clients to prioritize cleaning up their credit card debt and other high-interest loans, especially if retirement is nearing. The earlier a borrower can clear their debt the better, as it will only get more challenging to make those repayments on a fixed income, particularly if balances grow. If it makes sense, suggest using a private mortgage to help consolidate that debt into one lower payment at what is often a reduced interest rate.
Also, educate your clients on their investment options. One option to consider is investing in mortgages. CMI has compelling investment options for those looking to invest in the Canadian real estate markets. CMI’s suite of MIC funds pool investors’ funds for the purpose of investing in private mortgages. Mortgage Investment Corporations, or MICs, operate like mutual funds, but instead of stocks and bonds, MICs invest in mortgages. The funds generate monthly income for investors through interest and fees collected from the borrowers.
In Summary
As a trusted financial professional, you have a great opportunity to advise your clients on the optimal path for their financial success. Whether that’s helping them get out from under the burden of high-interest debt or referring them to a knowledgeable investment advisor for assistance with planning for retirement or diversifying their portfolio, you hold the keys to their financial future. By taking charge of this, you will not only set up your clients to succeed but also build a loyal client following that will enable you to build and grow your business.
Next Steps
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