We all want to have a happy, healthy and somewhat stress-free retirement. However, as I suggested in Monday's blog, there are risks that we have to mitigate (as best as we possibly can) in order to accomplish this.
We have to know and understand these risks.
Sadly and unfortunately we are not educated in these risks at an early age (financial literacy should be a core subject from the 1st through to the 12th grade). I actually looked into the curriculum for Ontario and this is what I found:
Is financial literacy offered to students as a separate course?
No. Financial literacy education is integrated in the existing Ontario curriculum.
How is financial literacy taught in Ontario schools?
Financial literacy is part of the elementary and secondary curriculum in many different subjects such as mathematics, social studies, Canadian and World studies, business studies and many others. In some subjects, students may be learning specific skills such as understanding money, consumer awareness, personal finances, budgeting and money management that will help them develop financial literacy skills. In other subjects, financial literacy connections may be made as students learn about their place in the world, as a responsible and compassionate citizen or when they study different economic systems.
Through the curriculum, students are developing skills in critical thinking, decision-making and problem solving that can be applied to subjects at school and to real life situations. Resources have been developed for teachers to help them connect financial literacy topics across the curriculum to deepen students' learning and make financial literacy more relevant.
So, depending on the teacher: "financial literacy connections may be made as students learn about their place in the world".
Good luck with that.
Teachers get a pretty favourable Defined Benefit Pension Plan that will ultimately take a good deal of the risk out of their achieving a successful retirement, so are they the best at educating our youth about financial risk (if it is not structurally built into the curriculum)?
The media try to help, but their target market is the already under-educated (in financial literacy topics) adult and a good deal of their motivation (other than selling their product) comes from trying to protect the under-educated masses from the predatory financial services industry.
We may all have some particular respect for Canadian Banks (because they were able to survive, mostly unscathed, through the financial crisis of 2008), but beneath the surface my friends, they are focused on their profitability and that makes them more interested in acquiring assets, collecting fees and minimizing costs that may run counter to the desire for their clients to pay lower fees and get better service.
So do we want to be turning to Canadian Banks and their affiliate investment advice channels for financial education? I would suggest that, in and of itself, poses a conflict of interest.
The Bank Of Canada is a more neutral player in our current state of affairs, non-political (for the most part) and with the Canadian economy and the Canadian people and their best interests at heart.
I know, parents (and caring teachers), that getting school age children to read the speeches of Bank of Canada staffers is probably going to be like pulling teeth. However, it is important stuff (as I said in the title) that we, for the most part, really don't want to think about.
But I think we should all take a moment to read what Carolyn Wilkins had to say in her speech today:
Canadian households need to play their part in ratcheting down their growth expectations and reigning in their exposure to financial risk because the returns are just not going to be there.
Paul (my business partner at High Rock) and I shake our heads at so many things that Canadian investors leave themselves vulnerable to (because they just don't know any better):
1) They pay too much in fees and costs for what they receive in return. Over-charged and under-served.
2) They are easily sold on investment advice that may be out-dated or just plain wrong (because the advice channel is built to pay the advisor quite handsomely and the bank / insurance company shareholder as well).
3) They really do not have a good understanding of risk and risk-adjusted returns (if they did why are they vulnerable to such wild portfolio swings?).
4) They, in many cases, do not have a detailed financial plan, that sets out the risk parameters, time horizons, cash flows and goals for their retirement.
A rainbow is not located at a specific distance from the observer, but comes from an optical illusion caused by any water droplets viewed from a certain angle relative to a light source. Thus, a rainbow is not an object and cannot be physically approached. Indeed, it is impossible for an observer to see a rainbow from water droplets at any angle other than the customary one of 42 degrees from the direction opposite the light source. Even if an observer sees another observer who seems "under" or "at the end of" a rainbow, the second observer will see a different rainbow—farther off—at the same angle as seen by the first observer. Wikipedia
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Scott Tomenson,CIM Managing Partner, Chief Investment Strategist