Being an optimist is an important characteristic of any advisor. If you don’t believe things will get better for your clients, what’s the point of giving advice? Luckily for asset owners, it’s been easy to stay positive. Government support for stock and real estate markets has been and continues to be steadfast.
This Labour Day message is for those that are new to the work force or those who might find themselves downsized as competition for jobs increases. It is ever more important for everyone who works for a living to ensure that they have their financial house in order. The reality is spending is easy and paying off debts can be difficult.
Every day technology advances, and artificial intelligence and robotics make it so that work can be increasingly automated. As a result, businesses need fewer people to produce the same amount of goods and services. In other words, if a robot or a computer can do someone’s job, that person may ultimately find themselves looking for work.
For example, according to the Bureau of Transportation and Statistics in the United States, just over 9% of all people employed work in the transportation industry. With trends toward a future of cars, taxi services, mass transit, and trucking all being autonomous we will likely see a vast reduction in employment in this industry.
This is extending across sectors, where productivity per employee becomes increasingly higher over time as AI and robotics make employees redundant. We are now seeing automation everywhere, and no industry is being spared. We see it everywhere from agriculture to manufacturing, even in my industry, financial services, brick and mortar bank branches are rapidly becoming obsolete. Many people now accept minimal person to person interaction while managing their financial affairs.
What does this mean?
The future, as always is fluid, and no one can say for sure what will happen, but as technology advances there may well be fewer and fewer jobs to go around leading to higher and higher unemployment.
In this third decade of the 21st century we now know that the only thing that is certain is uncertainty. As Joe Cocker and Jennifer Warns sang: “Who knows what tomorrow brings?” I can say confidently that no one does.
But what can we surmise? 1. Lower employment 2. Government money printing to support ever larger subsidies for those who are underemployed. 3. Lower prices for goods and services as demand dies off, labour costs decline because of the increased competition for what jobs remain.
Here are my thoughts for those that are in and entering the work force. The ones who will win are those who own productive assets. Businesses that provide essential services will want for nothing as government subsidies allow people to purchase food, electricity, and other necessities of everyday life.
It is therefore very important that everyone who can investigates how they can maximize their ownership stakes in businesses over time. It is important that those who have something to save do so in the most efficient way possible as it will become increasingly more difficult to save as time goes by.
Use registered plans as efficiently as possible. RRSPs, TFSAs, RESPs, RDSPs, and cash brokerage accounts add a lot of savings power when used properly and efficiently.
Make sure you have investigated all borrowings properly and ensure that you are using debt wisely. Shop your mortgages, lines of credit and credit cards and avoid non tax-deductible debt such as credit cards and lines of credit for personal consumption.
USE debt to help you accumulate assets where possible and when prudent. Buying too much real estate can be even more dangerous than having none but being prudent and owning your own home within your means is highly advisable.
USE tax deductible debt to leverage to invest where it fits into your budget, your time frame and your plans. Just like taking a mortgage out on a piece of real estate can be to your advantage allowing you to buy into a property over time, doing the same with a solid investment portfolio or rental property can be just as advantageous.
Consult the best financial advisor you can. Your business is extremely valuable to the company who holds your investments. Interview planners at various companies, look to friends and family for referrals and make sure you are protecting yourself and your family so that YOU are in-charge of your future – not your employers and not our governments. You must make yourself the priority. If you do, you will have reason to celebrate all the labour days to come.