A research paper published by the Conference Board of Canada argues that if more people relied on financial advisors, Canadian gross domestic product (GDP) would eventually increase by $2.3 billion.
In Financing the Future: Boosting Retirement Readiness and the Economy Through Financial Advice, a study sponsored by the Investment Funds Institute of Canada (IFIC), authors Pedro Antunes, Alicia Macdonald, and Matthew Stewart conclude that real Canadian GDP would be $2.3 billion higher by 2060 if 10% more households relied on financial advisors.
The study examines previous research that indicates financial advisors are able to encourage more disciplined savings and investment behaviour. If more people were to use financial advisors, research suggests this could result in higher level of household savings. The Conference Board authors used a model simulation to forecast the economic impact these potential increased savings would have over the long term.
"Results from the model simulation suggest that over the first few years of the forecast, the overall impact on the economy is negative. Decreases in consumption outweigh improvements in business investment and exports. Over the longer term, real GDP is positively affected by an increase in savings," reads the study. "Consumption recovers once investment income earned on the accumulated stock of savings is withdrawn in light of accelerated retirements. Business investment remains positive thanks to a steady increase in household savings. Exports also remain positive throughout the long term, but net trade becomes a drag on growth as higher domestic demand fuels growth in imports."
If more people were to rely on financial advisors, the authors say the long-term result would be a significant increase in savings which Canadians could use to supplement their retirement incomes. "It also has a positive impact on Canada’s potential economic output, which results in a permanent increase in income and profits in the economy," concludes the study.