You've probably seen billboards and transit ads offering up free tablets, or been tempted with a sky-high teaser rate, in exchange for switching your bank - incentives that seem too good to be true, and usually are after you've signed on the dotted line. Big enticing offers are one way financial institutions look to lull consumers from the competition - but a recent study finds these tactics aren't sitting well with Canadians.
The Retirement Readiness Poll conducted by Oaken Financial found 93% of respondents in the 55-plus age group don’t like the tease ’em and trap ’em practices many banks resort to. Benjy Katchen, vice president of deposits for Oaken Financial, concurs with their disenchantment.
“These tactics have been proven to work for selling furniture or cars,” he says. “The problem is that creating a stable and secure financial future takes time. Decisions around picking financial institutions or products should be based on the long run value created - not the temporary pleasure of a free iPad.” While these offers aren’t specifically targeted at retirees, they usually end up being affected, as they’re most likely to be lulled into complacency after switching banks. “These tablet offers are often accompanied by so much fine print that it almost requires a law degree to not get trapped by the offer,” says Katchen. “Furthermore, to add insult to injury, several financial institutions charge upwards of $100 to transfer a registered account like an RRSP or Tax Free Savings Account to another institution.”
And once the initial incentive wears off, a knowledge gap remains; 54% of those surveyed over the age of 55 say they don’t even know if they’re getting the best possible rates on investments from their current rates.
Take a Strategic Savings Approach
While 75% of those surveyed say they think switching banks is too much of a hassle, Katchen points out that in some cases it makes sense to not put all your financial eggs in one basket.
“Rather, I would recommend that Canadians seek a financial institution that has a free chequing account to be their day-to-day bank,” he says. “Then open accounts at two to three others to take advantage of good GIC rates while spreading their money around to ensure coverage by Canada Deposit Insurance Corporation.”
A Concern for Late Bloomers
The survey also looked at soon-to-be retirees and their attitudes surrounding their nest eggs and found retirement savings continue to be a concern for Canadians.
According to the poll, 57% say they won’t have enough money each month after they stop working, likely a byproduct of dwindling pension plans in light of heightened volumes of retirees.
“With the decline in the number of people that have pension plans that do this for them, this has become more challenging than ever for the majority of Canadians,” says Katchen. “That being said, there are still many people that have sizeable nest eggs in Canada.”
The key to stability lies in how you invest.
“For do-it yourself investors, investing at least a portion of their savings in fixed-term investments like bonds or guaranteed investment certificates (GICs) is imperative for providing this stability,” he adds.
Ultimately, financial literacy is the name of the game. Don’t make any sudden changes to your investments until you’ve weighed your options.
“It is very important and quite easy to compare rates,” adds Katchen. “This is a critical part of being an informed consumer.”