These are the items I want to highlight right now.
Please Note: I wrote this piece for financial advisors working in credit unions. But the advice applies to everyone. Feel free to use the advice accordingly.
Questions Asked – Answers Provided
When financial consumers and credit union members want to discuss financial literacy, I think they are really looking for financial wellness.
While you might get questions about contribution limits for RRSPs and TFSAs, the answer you give should probably offer needs to include information about emergency funds and insurance.
It’s a bit like asking your doctor about LDL and HDL in a cholesterol test when you should be figuring out how to change your diet or get more exercise.
Give them the information that will make a real difference
So, while members can benefit from understanding key concepts and terms about their personal finance, their lives will be improved when they put a plan in place that gives them the financial security they need and desire.
This is an important conversation to have with members, as we all try to sort through the physical and financial consequences of the greatest public health crisis in a century. And as we have witnessed, that health crisis became so much more.
COVID put all of us to the test. Now it’s time to move on and prepare for an uncertain future.
After all, hasn’t this whole episode reminded us that stuff happens? And we need to prepare, as individuals and as a society, for the possibility of chaos? Let’s help our members properly prepare for a future we cannot predict in detail.
Defining Financial Wellness
Let me really get this conversation started by sharing a definition of financial wellness I found from Fortune magazine.
Financial wellness, put simply, is the ability to have a healthy financial life. It means your debts are payable and you have ample emergency, college and retirement funds. You’re well prepared to handle any financial crisis.
John F. Wasik, [link=”ext-6876a811-cdc3-40b5-a183-772a553cf1e6″], October 11, 2019
In a nutshell, isn’t that what members are really looking for?
Answering the underlying question
While they might be asking questions about how to invest their RRSP money or whether they should buy term or whole life insurance, their real goal is financial peace of mind and a decent night’s sleep.
And we can help members achieve financial wellness by presenting them with the building blocks they need to put their financial house in order. And those building blocks include:
- insurance for emergency needs
- a nest egg for financial potholes and uncertainty
- money for homeownership, college or university education, and eventually, retirement
- a personal will and plan for one’s passing that has been shared with those responsible for its implementation
Preparing for the Unexpected – Insurance
Everyone “knows” they need insurance. To:
- Cover medical costs, including hospital care, dental services, related personal benefits, and lost wages due to illness or accident
- Replace their home and the things in it
- Safeguard their families in the event of their death
While insurance is often a topic that members want to avoid (especially life insurance), it is essential to their family’s financial well-being.
Health and Disability Insurance
Many of your members have health and disability insurance with their employers, but some don’t. Maybe they’re a small business owner or a budding entrepreneur. Or their employer doesn’t offer that benefit.
And there are many aspects to health and disability insurance you can help them understand.
Go ahead. Take the time. Or at least introduce the topic. They’ll appreciate it.
Home and Tenant Insurance
Yes, families with a mortgage generally need home insurance, but families without a mortgage need protection too. This includes families who own their home without a mortgage and families who rent – tenants.
Even members without a mortgage will benefit from a good home or tenant policy’s security and confidence.
You know that. And you can help members of your credit union who don’t have that basic tentpole in their financial framework understand it too.
Maybe members don’t want to think about the prospect of their own death, but they still need to make sure their families are financially cared for if they die unexpectedly.
According to [link=”ext-1c10177f-7a3c-429a-a198-aafb51bebd63″], 49% of Canadians have never purchased their own life insurance. While many of these families have insurance through their employee benefits plan at work, that is not an effective solution in the event of job loss or career change.
This leaves far too many Canadians in a dangerous financial situation – one we can help them fix.
Financial wellness means making sure you have enough insurance to cover your family’s needs.
Financial literacy means that you understand the difference between term and whole life insurance and then decide what is best for you and your family.
You can help your members achieve both of these goals. You can have “the conversation” that starts them thinking about their family’s life insurance needs. Then you can help them understand their options and decide how to prepare.
Make insurance part of your next member update conversation. You might find they appreciate it.
Preparing for the Rough Spots – Putting Together a Nest Egg
I suspect that none of the items in this list are unusual or unexpected. The idea of having emergency funds – a nest egg – available to help during possible difficult times like job loss or significant injury or illness – is certainly not new.
And it is probably the easiest one for members to understand and accept.
But even so, many Canadians report that they are living paycheque to paycheque, without the financial resources to cover hardship. And [link=”ext-f4b36e91-4bdb-417a-aedf-ba6be42adfd3″], published in 2020 by the Canadian government, shows that issues such as family or marital status, homeownership and income have a distinct impact on savings levels.
Helping members to establish savings accounts and regularly transfer money to those accounts is probably the first step in helping them to achieve financial wellness.
Preparing to Meet Your Goals – Home Ownership, College, and Retirement
After you cover your necessities, it’s nice to start planning for long-term goals. Many members probably only start talking to financial advisors at their credit union when they address one of these goals. Maybe:
- A young couple starting a family approaches you about and looking for an ideal starter home and needs mortgage advice.
- Parents and grandparents have figured out that they need your advice about saving money for their children’s education
- Parents have watched their kids grow up and begin to establish a life of their own. Now those members have come in asking for detailed advice as they prepare for their retirement
I suspect this is when members truly believe they need to improve their financial literacy. You can help them become financially literate, but you can also implement those plans and improve their financial wellness.
Mortgages and Home Ownership
Owning a home is often the single largest purchase a family will ever make. Finding a mortgage, finding a home, and putting all the pieces in place can be confusing and terrifying. Members will come to you to help make that process less stressful.
As kids get older, parents will likely start thinking about how they can help their kids with college and university expenses. Your help with understanding Registered Education Savings Plans and maybe even scholarship options will be appreciated.
Retirement – Entering One’s “Golden Years”
As your members prepare to retire, they have many things to consider. Personal savings, work-related pensions, and government programs all have their own rules. There is a whole set of acronyms that many of them are going to find confusing. More information and advice will be appreciated.
Whether members are trying to:
- Understand their options for the Canada Pension Plan (CPP)
- Decide on the benefits of Retirement Investment Fund (RIF) or annuities, or
- Figure out how to handle a work pension plan – buyout of indexed plan
You can help them understand and act on their options.
Preparing for the Inevitable – Death and Taxes
Nothing is more predictable when talking about financial planning than hearing the phrase “death and taxes.” Death and taxes will almost certainly come to mind when people develop their financial literacy or improve their financial wellness.
While you may have already discussed life insurance, talking to your clients about having a will is also an important part of any financial wellness plan. You can certainly help introduce that conversation, begin a review of their needs and even discuss how to proceed.
There are plenty of options for getting a will prepared – online options and local estate lawyers who can help with this necessary though discomforting process.
Ideally, part of tax preparation should be retirement preparation. Many of the decisions about a Registered Retirement Savings Plan (RRSP) versus a Tax-Free Savings Account (TFSA) are based on their impact on a member’s tax status, both now and when the member hopes to retire.
And although we already reviewed topics to discuss during the preparation for retirement, the conversations about how to save for it obviously must come first.
Many members will list this as a topic of confusion in their “quest” for financial literacy. You can help them understand enough to achieve financial well-being – by actually investing in their retirement.
And as you know, this is a perennial issue. The best day to start doing any of these things – improving their own and their family’s financial wellbeing — is the day you sit down to start the conversation.
by Todd Race
When I think about the effectiveness of Environmental, Social and Governance (ESG) Investing, I often look back in history to find examples of social movements that used economic power to affect social policy. There are examples of campaigns to improve society and the economy that convince established interests of the need to change with the times.
Abolition, the movement to abolish the slave trade, is one of the first to come to mind for me. And Canada played a prominent role in making change possible before anyone else.
Abolition: A brief history that starts with a personal, Canadian touch
I have a personal, present-day connection to the abolition movement of the 18th & 19th centuries. Not long ago, I signed a petition calling for a street near my home in Toronto to be renamed.
Dundas Street is named after Henry Dundas, 1st Viscount Melville. As a minister under Prime Minister Pitt, he is accused of playing a major role in delaying the abolition of slavery in the British Empire in the late 18th century.
We can find the name of Dundas all over Ontario. There are major streets, public squares, towns, and even counties named after him.
This was because of his friendship with John Graves Simcoe, lieutenant governor of Upper Canada, 1791-1796. Yes, they were friends even though they took very different stands on abolition.
Simcoe was an abolitionist before he arrived in Upper Canada. And he was able to oversee the passage of the Act Against Slavery at the first meeting of the Executive Council of Upper Canada in 1793. This was the first piece of anti-slavery legislation passed anywhere in the British Empire. Efforts in other colonies, even in British North America (New Brunswick, Quebec in particular), were not so successful.
Note: Since I first wrote this post, the City of Toronto has announced that they will rename streets and squares named after Dundas. The process of choosing new names has only just begun.
Abolitionist Efforts in Mother England Went on for Decades
While the Executive Council of Upper Canada acted in 1793, it took until 1807 for the British Parliament to pass the Slave Trade Act, officially known as An Act for the Abolition of the Slave Trade. This act abolished the slave trade – the transportation of slaves mostly to regions in the new world, namely the United States and the Caribbean. But it would take until 1833 for them to actually abolish slavery itself.
The campaign in Great Britain to abolish the slave trade began with the establishment of the Society for the Abolition of the Slave Trade in 1787. It included organizing petition campaigns and boycotts of produce created by slave labour – especially West Indian Sugar, produced on slave plantations.
One element of the Sugar Boycott was the effort to point out that sugar was available from plantations elsewhere in places like Malaysia that were not produced using slave labour. Similar to the emphasis in climate change education to point to renewable options to fossil fuels.
These abolitionist campaigns were important for:
- educating the public about the existence and reality of slavery
- demonstrating support for abolition in the community, and
- focusing the attention of public officials on efforts to achieve abolition
These campaigns went on for years as abolitionists fought to eliminate slavery in all its capacities.
But like so many other publicly popular campaigns (women’s suffrage, worker’s rights, abortion rights, the anti-apartheid movement, to name just a few), the campaign needed decades to finally convince the British Parliament to abolish the slave trade. In fact, slavery itself was not abolished in the British Empire until 1833-34.
Success was Incremental in Canada and Britain
The Act Against Slavery, passed in Upper Canada in 1793, had a number of provisions that took effect over time. This served to calm down the slave owners while introducing the necessary changes. It is unsightly for us now, but it got things done. The act decreed that no new slaves could enter the colony and that no children born to a slave would become slaves.
This meant that slavery would disappear over time. It also meant that slaves who escaped along the Underground Highway had a place to go. Without that, it’s hard to understand how any escape efforts could have succeeded.
The British Parliament started by abolishing the transportation of slaves from Africa to the Caribbean colonies in 1807. It took another 25 years to actually abolish the use of slave labour on the sugar and cotton plantations themselves.
Economic Aspects of the British Abolitionist Campaign
A major element of the century-long abolitionist campaigns was economic pressure – what we now call boycotts. The most famous of these was the British Sugar Boycott I mentioned before.
But sugar was not the only product that abolitionists identified with the slave trade. The Committee to Abolish Slavery used these campaigns many times during the forty years it took for the Committee to Abolish Slavery to accomplish its aims fully.
The Campaign to Abolish Slavery concentrated much of its efforts on public education and participation from the onset. Campaigns aimed at education and personal economic action succeeded in bringing attention to the evils of the slave trade and suggesting ways for people to get involved in their daily lives.
Interestingly, while the Sugar Boycott was a very successful part of the anti-slavery campaign, the term “boycott” itself was not actually created until the 1880s – in “honour” of Charles Cunningham Boycott, a British estate manager in Ireland.
US Abolitionists Used Economic Pressure Too
As we know, slavery continued in the United States until Abraham Lincoln signed the Emancipation Proclamation in 1862, at the height of the American Civil War. Abolitionist efforts in the United States before the Civil War also included refusing to buy or use products produced with slave labour. In the United States, this included cotton and tobacco.
Sustained by Lobbyists – Not by Economic or Social Relevance
As the Campaign to Abolish Slavery got started, historical conditions began to make the continuation of the slave uneconomic and unethical. The development of modern industry highlighted the inefficiencies of the plantation system that needed slaves to survive. These economic developments and modernizations gave added impetus to ethical, moral, and spiritual efforts.
Although plantations became less economically viable for society as a whole, those who personally benefitted from their continuation had a significant interest in maintaining them. As a minister in the Pitt government and leading the efforts against Napolean, Dundas played a significant part in delaying abolition and propping up the interests of those in the slave trade.
And now today’s lobbyists for the fossil fuel industry are playing a similar role in maintaining an industry that society has outgrown. Modern advancements make renewable energy a more cost-effective way of producing the energy we need.
Activists and commentators point to this fact – that fossil fuels are becoming less economically viable and environmentally damaging. Renewable energy is becoming more cost-effective and has been for years. The only way to maintain coal and gas as energy sources is through subsidies. Environmentalists have been accusing the industry of this for years. As subsidies become less acceptable and the fossil fuel industry becomes less viable, ESG investors can champion new economically and environmentally more effective opportunities.
Abolitionists Then – ESG Investors Now
I see a historical overlap here with our modern emphasis on ESG. ESG seeks to look at outmoded economic models in a socially relevant light.
This is especially true of efforts to highlight environmental aspects of ESG – the first part of environmental, social and governmental investing.
Transition is Essential
In Upper Canada, Lord Simcoe was able to introduce legislation that effectively abolished slavery, just not right away. His compromise was to ban the further importation of slaves into Upper Canada and ensure that children born to enslaved women would not become slaves themselves.
Efforts in Britain ended up taking the same gradualist route, chipping away at the slave trade and its role in the world.
The American Civil War is an example of abrupt change that brought an effective end to slavery worldwide.
Climate change initiatives also center around the struggle to shift from one economic/environmental model to another. Current efforts worldwide demonstrate that, including President Biden’s infrastructure plans and the carbon tax fight here in Canada.
When we look back on the abolitionist movement of the late 19th century, it’s hard to think that anyone could have ever supported the continuation of the slave trade. When others look back on early 21st-century society, I hope that they will be equally confused by lingering efforts to maintain the fossil fuel industry.