The IMF predicts that if Canada and the U.S. fail to reach agreement on NAFTA, Canada’s competitiveness could take a serious hit, resulting in a drop of 0.4 percentage points or more in GDP. Donald Trump’s tweets about Justin Trudeau could further dampen the outlook. But, astute financial advisors can help clients meet their goals in these difficult times by staying on course.
According to CBC, the IMF lists the recent tense trade negotiations and the threat of major correction in the housing market as “significant risks.” Predicting that Canadian economic growth will slow in the near term from 3 percent last year to 2.1 percent in 2018, with another drop to 2 percent in 2019. The news gets worse the longer the forecast period, with potential growth limited to as little as 1.75 percent in the medium term due to “sluggish labour productivity growth and population aging.” Other factors playing into this overall picture are U.S. tax cuts and stronger government spending, as well as other policy changes in the U.S. under the Trump administration.
There are domestic challenges to our competitiveness as well. As reported in last week’s Knowledge Bureau Report, the Bank of Canada is expected to raise its benchmark interest rate in July, which will put pressure on anyone carrying personal or household debt. It could also increase the risk of a major correction in the housing market. There have already been significant slowdowns in the once-hot markets of the Greater Toronto Area (GTA) and in Metro Vancouver. In the GTA, May home sales were down over 22 percent from last year. Metro Vancouver faced a decline of more than 35 percent in the same period.
These are serious challenges to Canada’s competitiveness on the global stage. They signal the need for a review of financial plans by advisors here at home, especially for their nervous clients. Reviewing debt management opportunities and sticking to investment plans, with a good measure of tax efficiency is the key to weathering the storm clouds gathering.
Now more than ever, it’s essential for advisors and clients to keep on top of economic change and to develop strategies to shore up your clients’ wealth. Knee-jerk reactions could secure unwanted tax liabilities or lock in irreversible losses, and strategies must address this economic uncertainty and potential decline of family wealth.
Additional educational resources:
- Join Knowledge Bureau in November for this year’s Distinguished Advisor Conference where Dr. Jack Mintz will address Canada’s declining competitiveness. Learn more about this can’t miss speaker session here.
- Knowledge Bureau’s Debt and Cash Flow Management course will show you how you can help your clients avoid the erosion of their wealth that comes with debt.
- Or, go one step further and learn strategies for building sustainable wealth for your clients with our Elements of Real Wealth Management course, the first step in working towards your Real Wealth Manager Enroll in any of our courses today to save on tuition before the June 15 registration deadline.
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