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Savings and Investments - Canada - January 2015

“Devising innovative incentive schemes is the key to encouraging product consolidation and achieving the Holy Grail of increasing customer wallet share in the savings and investments marketplace.”
– Sanjay Sharma, Senior Financial Services Analyst

This report discusses the following key topics:

  • Strategies to encourage product consolidation
  • Successful customer acquisition through better alignment of marketing strategies with customer choice factors
  • Helping financially less prepared groups meet their financial priorities
  • Understanding the distinct financial attitudes of Chinese Canadians

Low interest rates, volatile stock markets and a tepid economy have impacted the savings of many Canadians. In addition to this, there are concerns about the housing market and the economic fallout that might result from an increase in interest rates due to the high levels of household debt that Canadians have. But Canada’s government-funded pension plan and retirement income system remains strong. Additionally, a large number of Canadians own registered (tax-advantaged) as well as non-registered investment vehicles and the financial sector is in robust health.

This report covers the drivers of the savings and investments market in Canada, exploring trends related to ownership of products, how Canadians choose their financial institution for deposits and investments, main financial priorities of Canadians, levels of consumer confidence and attitudes towards savings and investments.

Excluded:
Employer-sponsored pension plans and government programs such as CPP, OAS, etc.

 

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Table of contents

  1. Introduction

      • Excluded
        • Abbreviations
          • Glossary
            • Active management
              • Annuities
                • Atlantic Provinces
                  • Canada Pension Plan
                    • Decumulation
                      • Dollar cost averaging
                        • Deferred Profit Sharing Plan (DPSP)
                          • Equities
                            • Exchange-traded funds
                              • Guaranteed Investment Certificate
                                • Housing starts
                                  • Index fund
                                    • Life Income Fund
                                      • Management expense ratio
                                        • Old Age Security
                                          • Passive management
                                            • Registered Retirement Income Fund (RRIF)
                                              • Registered Retirement Savings Plan (RRSP)
                                                • Tax-Free Savings Account (TFSA)
                                                • Executive Summary

                                                    • The market
                                                      • Market factors
                                                        • IMF expects the Canadian economy to remain solid, but many risks remain
                                                          • Interest rates, inflation and market volatility
                                                            • Outlook on the real estate and housing market
                                                              • British Columbians have the highest net worth
                                                                • Household debt in Canada
                                                                  • Population count and growth in Canada
                                                                    • Companies, brands and innovation
                                                                      • The consumer
                                                                        • Half of Canadians have a TFSA and/or RRSP
                                                                          • Figure 1: Ownership of savings and investment products, September 2014
                                                                        • TD and RBC are the top two choices for savings and investment products
                                                                          • Figure 2: Choice of financial institution for savings and investments, September 2014
                                                                        • Paying down credit card debt is the number one financial priority
                                                                          • Figure 3: Financial priorities over the next 12 months, September 2014
                                                                        • Younger Canadians relatively more open to product consolidation but also relatively more likely to switch their FI
                                                                          • Figure 4: Attitudes towards savings and investments, September 2014
                                                                        • What we think
                                                                        • Issues and Insights

                                                                            • Strategies to encourage product consolidation
                                                                              • The facts
                                                                                • The implications
                                                                                  • Successful customer acquisition through better alignment of marketing strategies with customer choice factors
                                                                                    • The facts
                                                                                      • The implications
                                                                                        • Helping financially less prepared groups meet their financial priorities
                                                                                          • The facts
                                                                                            • The implications
                                                                                              • Understanding the distinct financial attitudes of Chinese Canadians
                                                                                                • The facts
                                                                                                  • The implications
                                                                                                  • Trend Application

                                                                                                      • Trend: Old Gold
                                                                                                        • Trend: Life Hacking
                                                                                                          • Trend: Generation Next
                                                                                                          • Market Drivers

                                                                                                            • Key points
                                                                                                              • Economic overview
                                                                                                                • IMF expects the Canadian economy to remain solid, but many risks remain
                                                                                                                  • Figure 5: Canada’s GDP, by quarter, Q1 2008-Q1 2014
                                                                                                                  • Figure 6: Household disposable incomes and savings in Canada, by quarter, Q1 2008-Q1 2014
                                                                                                                  • Figure 7: Canada’s unemployment rate, by gender, 2008-14
                                                                                                                • Interest rates, inflation and market volatility
                                                                                                                  • Figure 8: Inflation rates in Canada, 2004-14
                                                                                                                • Outlook on the real estate and housing market
                                                                                                                  • British Columbians have the highest net worth
                                                                                                                    • Figure 9: Canada median net worth, by province, 2012
                                                                                                                  • Household debt in Canada
                                                                                                                    • Demographic overview
                                                                                                                      • Population count and growth in Canada
                                                                                                                        • Figure 10: Share of population of Canada, by territory/province, 2014
                                                                                                                      • Canada’s population is expected to age in the coming years
                                                                                                                        • Figure 11: Population aged 65 years and over in Canada, historical and projected (% of total), 1971-2061
                                                                                                                        • Figure 12: Projected trends in the age structure of the Canada population, 2014-19
                                                                                                                      • Canadian mutual fund fees
                                                                                                                        • Decumulation and longevity risk
                                                                                                                          • Financial markets performance
                                                                                                                          • Strengths and Weaknesses

                                                                                                                            • Strengths
                                                                                                                              • Weaknesses
                                                                                                                              • Who’s Innovating?

                                                                                                                                • Key points
                                                                                                                                  • TD Bank app helps customers pinch pennies
                                                                                                                                    • Money transfer through social media
                                                                                                                                      • Toronto start-up Wealthsimple offers “really boring, long-term” way to accumulate wealth
                                                                                                                                      • Market Sizes

                                                                                                                                        • Key points
                                                                                                                                          • RRSP/RRIF/LIRA/DPSP
                                                                                                                                            • TFSA
                                                                                                                                              • Exchange-traded funds
                                                                                                                                                • Mutual funds
                                                                                                                                                  • Stocks, bonds and deposits in financial institutions
                                                                                                                                                    • Segregated funds
                                                                                                                                                    • Companies and Products

                                                                                                                                                        • Bank of Montreal (BMO)
                                                                                                                                                          • Overview and company information
                                                                                                                                                            • Recent activity
                                                                                                                                                              • CI Financial
                                                                                                                                                                • Overview and company information
                                                                                                                                                                  • Recent activity
                                                                                                                                                                    • Tangerine Bank (formerly ING Direct)
                                                                                                                                                                      • Overview and company information
                                                                                                                                                                        • Recent activity
                                                                                                                                                                          • BlackRock Asset Management Canada
                                                                                                                                                                            • Overview and company information
                                                                                                                                                                              • Recent activity
                                                                                                                                                                                • Fidelity Investments Canada
                                                                                                                                                                                  • Overview and company information
                                                                                                                                                                                    • Recent activity
                                                                                                                                                                                      • Scotiabank
                                                                                                                                                                                        • Overview and company information
                                                                                                                                                                                          • Recent activity
                                                                                                                                                                                          • Brand Communication and Promotion

                                                                                                                                                                                            • Key points
                                                                                                                                                                                              • BMO is the most active direct mailer for savings and investments
                                                                                                                                                                                                • Figure 13: Direct mail volume related to savings and investments, December 2013-December 2014
                                                                                                                                                                                              • Featured campaigns from Mintel Comperemedia
                                                                                                                                                                                                • TD Mutual Funds: Learn to invest with confidence
                                                                                                                                                                                                  • Power Savings Account from Scotiabank
                                                                                                                                                                                                    • MarketSmart GICs from RBC
                                                                                                                                                                                                    • The Consumer – Ownership of Savings and Investment Products

                                                                                                                                                                                                      • Key points
                                                                                                                                                                                                        • Half of Canadians have a TFSA and/or RRSP
                                                                                                                                                                                                          • Figure 14: Ownership of savings and investment products, September 2014
                                                                                                                                                                                                        • Broad trends
                                                                                                                                                                                                          • Product ownership peaks among over-55s
                                                                                                                                                                                                            • Figure 15: Ownership of savings and investment products, by age, September 2014
                                                                                                                                                                                                          • Trends by product
                                                                                                                                                                                                            • Repertoire analysis
                                                                                                                                                                                                              • More than a third of Canadians have five or more savings/investment products
                                                                                                                                                                                                                • Figure 16: Repertoire analysis of savings and investment products, September 2014
                                                                                                                                                                                                            • The Consumer – Choice of Financial Institutions

                                                                                                                                                                                                              • Key points
                                                                                                                                                                                                                • TD and RBC are the top two choices for savings and investment products
                                                                                                                                                                                                                  • Figure 17: Choice of financial institution for savings and investments, September 2014
                                                                                                                                                                                                                • Tangerine customers have significantly higher product ownership rates compared to Desjardins customers
                                                                                                                                                                                                                  • Figure 18: Comparing ownership of savings and investment products among customers of Desjardins and Tangerine, September 2014
                                                                                                                                                                                                              • The Consumer – Choice Factors

                                                                                                                                                                                                                • Key points
                                                                                                                                                                                                                  • Fees rank as the number one choice factor
                                                                                                                                                                                                                    • Figure 19: Choice factors for choosing a financial institution for savings and investments, September 2014
                                                                                                                                                                                                                  • Around eight in 10 consider reputation of their financial institution when choosing one for their savings and investments
                                                                                                                                                                                                                    • Figure 20: Choice factors relating to reputation, September 2014
                                                                                                                                                                                                                  • For about two thirds of Canadians, consolidation of products is a choice factor
                                                                                                                                                                                                                    • Figure 21: Choice factors related to convenience, September 2014
                                                                                                                                                                                                                • The Consumer – Consumer Confidence and Opinions About the Economy

                                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                                    • Summary of consumer confidence
                                                                                                                                                                                                                      • Figure 22: Consumer confidence and opinions about the economy, September 2014
                                                                                                                                                                                                                    • Consumers somewhat pessimistic about their financial outlook
                                                                                                                                                                                                                      • Figure 23: Consumer confidence related to personal finances, September 2014
                                                                                                                                                                                                                    • Mixed views on the housing market
                                                                                                                                                                                                                      • Figure 24: Consumer confidence related to the housing market, September 2014
                                                                                                                                                                                                                    • Less than a third of Canadians would consider moving from their province for economic reasons
                                                                                                                                                                                                                      • Figure 25: Other consumer confidence attitudes, September 2014
                                                                                                                                                                                                                  • The Consumer – Financial Priorities

                                                                                                                                                                                                                    • Key points
                                                                                                                                                                                                                      • Summary of financial priorities
                                                                                                                                                                                                                        • Figure 26: Financial priorities over the next 12 months, September 2014
                                                                                                                                                                                                                      • Paying down credit card debt is the number one priority
                                                                                                                                                                                                                        • Figure 27: Priorities related to debt repayment, September 2014
                                                                                                                                                                                                                      • Improving and/or maintaining a credit score is most important for young Canadians
                                                                                                                                                                                                                        • Figure 28: Other financial priorities, September 2014
                                                                                                                                                                                                                      • How Quebecers differ on financial priorities
                                                                                                                                                                                                                        • Figure 29: Significant differences in financial priorities between Quebecers and other Canadians, September 2014
                                                                                                                                                                                                                      • Men are more interested in short-term financial trading
                                                                                                                                                                                                                        • Figure 30: Significant differences in financial priorities, by gender, September 2014
                                                                                                                                                                                                                    • The Consumer – Attitudes towards Savings and Investments

                                                                                                                                                                                                                      • Key points
                                                                                                                                                                                                                        • Summary of attitudes
                                                                                                                                                                                                                          • Figure 31: Attitudes towards savings and investments, September 2014
                                                                                                                                                                                                                        • Younger Canadians relatively more open to product consolidation but also relatively more likely to switch their FI
                                                                                                                                                                                                                          • Figure 32: Agreement with statements about consolidation and switching intentions, by age, September 2014
                                                                                                                                                                                                                        • Middle-aged Canadians less trustful of financial advisers
                                                                                                                                                                                                                          • Figure 33: Agreement with statements about satisfaction with financial institutions and preference for banks vs credit unions, by age, September 2014
                                                                                                                                                                                                                        • Women have a generally lower risk tolerance
                                                                                                                                                                                                                          • Figure 34: Agreement with statements about risk tolerance, by gender, September 2014
                                                                                                                                                                                                                        • Older Canadians are more aware of fees
                                                                                                                                                                                                                          • Figure 35: Agreement with statements about savings habits and awareness, by age, September 2014
                                                                                                                                                                                                                      • The Consumer – Chinese Canadians and Savings and Investments

                                                                                                                                                                                                                        • Key points
                                                                                                                                                                                                                          • Chinese Canadians have a higher ownership of most savings and investment products
                                                                                                                                                                                                                            • Figure 36: Ownership of savings and investment products, Chinese Canadians compared to Whites/Caucasians, September 2014
                                                                                                                                                                                                                          • Paying down debt is a much lower priority for Chinese Canadians
                                                                                                                                                                                                                            • Figure 37: Financial priorities: Chinese Canadians vs Whites/Caucasians, September 2014
                                                                                                                                                                                                                          • Chinese Canadians have a higher investment risk tolerance relative to Whites/Caucasians
                                                                                                                                                                                                                            • Figure 38: Attitudes towards savings and investments, Chinese Canadians compared to Whites/Caucasians, September 2014
                                                                                                                                                                                                                        • The Consumer – Target Groups

                                                                                                                                                                                                                          • Key points
                                                                                                                                                                                                                            • Five target groups
                                                                                                                                                                                                                              • Figure 39: Target groups, September 2014
                                                                                                                                                                                                                            • Loyalists (24%)
                                                                                                                                                                                                                              • Dissatisfied (20%)
                                                                                                                                                                                                                                • Risk Takers (18%)
                                                                                                                                                                                                                                  • Risk-averse (19%)
                                                                                                                                                                                                                                    • Disciplined Savers (19%)
                                                                                                                                                                                                                                    • Appendix – The Consumer – Ownership of Savings and Investment Products

                                                                                                                                                                                                                                        • Figure 40: Ownership of savings and investment products, September 2014
                                                                                                                                                                                                                                        • Figure 41: Most popular ownership of savings and investment products, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 42: Next most popular ownership of savings and investment products, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 43: Ownership of savings and investment products, by most popular choice of financial institution, September 2014
                                                                                                                                                                                                                                        • Figure 44: Ownership of savings and investment products, by next most popular choice of financial institution, September 2014
                                                                                                                                                                                                                                      • Repertoire analysis
                                                                                                                                                                                                                                        • Figure 45: Repertoire of ownership of savings and investment products, September 2014
                                                                                                                                                                                                                                        • Figure 46: Repertoire of ownership of savings and investment products, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 47: Ownership of savings and investment products, by repertoire of ownership of savings and investment products, September 2014
                                                                                                                                                                                                                                    • Appendix – The Consumer – Choice of Financial Institutions

                                                                                                                                                                                                                                        • Figure 48: Choice of financial institution, September 2014
                                                                                                                                                                                                                                        • Figure 49: Most popular choice of financial institution, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 50: Next most popular choice of financial institution, by demographics, September 2014
                                                                                                                                                                                                                                    • Appendix – The Consumer – Choice Factors

                                                                                                                                                                                                                                        • Figure 51: Choice factors when choosing financial institution, September 2014
                                                                                                                                                                                                                                        • Figure 52: Choice factors when choosing financial institution – No fee/low fees on banking accounts, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 53: Choice factors when choosing financial institution – Reputation of provider, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 54: Choice factors when choosing financial institution – No minimum balance requirement for no fees, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 55: Choice factors when choosing financial institution – Branch customer service reputation, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 56: Choice factors when choosing financial institution – Having a number of branches in convenient locations, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 57: Choice factors when choosing financial institution – Interest rate is higher than other financial institutions, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 58: Choice factors when choosing financial institution – Variety of banking products available, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 59: Choice factors when choosing financial institution – Having other banking products with the same financial institution, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 60: Choice factors when choosing financial institution – Mobile banking capabilities, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 61: Choice factors when choosing financial institution – Recommended by family/friends, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 62: Choice factors when choosing financial institution – Level of community involvement of the financial institution, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 63: Choice factors when choosing financial institution – Introductory gift for new customers offered, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 64: Choice factors when choosing financial institution, by most popular choice of financial institution, September 2014
                                                                                                                                                                                                                                        • Figure 65: Choice factors when choosing financial institution, by next most popular choice of financial institution, September 2014
                                                                                                                                                                                                                                    • Appendix – The Consumer – Consumer Confidence and Opinions about the Economy

                                                                                                                                                                                                                                        • Figure 66: Consumer confidence, September 2014
                                                                                                                                                                                                                                        • Figure 67: Agreement with the statements ‘I am more cautious with my money than I was five years ago’ and ‘I believe that house prices in Canada are overvalued’, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 68: Agreement with the statements ‘I believe that house prices will increase in the coming year’ and ‘My sources of income have not increased as much as the rate of inflation over the past few years’, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 69: Agreement with the statements ‘It is harder to find a job now than it was five years ago’ and ‘I prefer the security of a locked in interest rate over a variable rate’, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 70: Agreement with the statements ‘I believe I/my family will be financially better off a year from now’ and ‘I believe that it is not financially wise to borrow against the equity in your home’, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 71: Agreement with the statements ‘I would consider moving away from my province to take advantage of better economic opportunities in other parts of Canada’ and ‘I think that the stock market will be higher a year from now’, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 72: Agreement with the statements ‘It is better to rent than buy a new home at present’ and ‘I/we are more comfortable with taking on debt now than a year ago’, by demographics, September 2014
                                                                                                                                                                                                                                    • Appendix – The Consumer – Financial Priorities

                                                                                                                                                                                                                                        • Figure 73: Financial priorities, September 2014
                                                                                                                                                                                                                                        • Figure 74: Most popular financial priorities, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 75: Next most popular financial priorities, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 76: Other financial priorities, by demographics, September 2014
                                                                                                                                                                                                                                    • Appendix – The Consumer – Attitudes towards Savings and Investments

                                                                                                                                                                                                                                        • Figure 77: Attitudes towards savings and investments, September 2014
                                                                                                                                                                                                                                        • Figure 78: Agreement with the statements ‘I am aware of the fees that I pay for my banking and investment products’ and ‘I prefer an investment strategy designed to grow steadily and avoid sharp ups and downs’, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 79: Agreement with the statements ‘I prefer to save whenever I can rather than a fixed amount at regular intervals’ and ‘I believe that I will receive objective advice from a financial adviser’, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 80: Agreement with the statements ‘I prefer investments that are low risk even if my returns are lower than the inflation rate’ and ‘Investing in property is safer than investing in equity-based products’, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 81: Agreement with the statements ‘It makes more sense to overpay on a mortgage rather than add money to savings/investments’ and ‘I have set up a direct debit transfer to my savings account every month’, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 82: Agreement with the statements ‘It is better to have all savings and investments with one financial institution’ and ‘I prefer to have my savings at a local credit union rather than at a big bank’, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 83: Agreement with the statement ‘I am thinking of switching my main financial institution within the next 12 months’, by demographics, September 2014
                                                                                                                                                                                                                                    • Appendix – The Consumer – Chinese Canadians and Savings and Investments

                                                                                                                                                                                                                                        • Figure 84: Selected demographics, by total population against Chinese Canadians, September 2014
                                                                                                                                                                                                                                    • Appendix – The Consumer – Target Groups

                                                                                                                                                                                                                                        • Figure 85: Target groups, September 2014
                                                                                                                                                                                                                                        • Figure 86: Target groups, by demographics, September 2014
                                                                                                                                                                                                                                        • Figure 87: Ownership of savings and investment products, by target groups, September 2014
                                                                                                                                                                                                                                        • Figure 88: Choice of financial institution, by target groups, September 2014
                                                                                                                                                                                                                                        • Figure 89: Choice factors when choosing financial institution, by target groups, September 2014
                                                                                                                                                                                                                                        • Figure 90: Consumer confidence, by target groups, September 2014
                                                                                                                                                                                                                                        • Figure 91: Financial priorities, by target groups, September 2014
                                                                                                                                                                                                                                        • Figure 92: Attitudes towards savings and investments, by target groups, September 2014

                                                                                                                                                                                                                                    Companies Covered

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                                                                                                                                                                                                                                    Savings and Investments - Canada - January 2015

                                                                                                                                                                                                                                    £3,277.28 (Excl.Tax)