Canadians’ focus on debt reaches highest point in five years: Manulife Investor Sentiment Index

WATERLOO– More Canadians say their top priority is to tackle their debts as they head into the New Year, according to the latest national poll for Manulife Financial, Canada’s leading insurance and wealth management company.

Those who say their top financial priority is to pay down credit cards, lines of credits and mortgages hit a new five-year high in Manulife’s poll, conducted in mid-December by Research House, an Environics Company.

More than a quarter of Canadians (29 per cent) said their top priority is to pare back their consumer credit, up from a low of 20 per cent heading into 2008. The next most-important priority – paying down the mortgage – was chosen by 14 per cent, identical to a year ago, but up from 11 per cent the prior year.

The third-ranked priority cited in the poll, to save for retirement, was named by 13 per cent of the 1,000 respondents, up from 11 per cent a year ago.

“Paying down debt is central to a successful financial plan and it’s encouraging that many Canadians are growing more focused on taming their credit, mortgages and other bills,” said Paul Rooney, President and CEO, ManulifeCanada. “Given the recent economic challenges so often in the news, we shouldn’t be too surprised that Canadians are working harder to get their finances in shape.”

When asked about their overall financial position, almost half (49 per cent) said they are better off than five years ago.

Another 28 per cent say they’re in the same financial spot as in 2005, while less than a quarter (23 per cent) say they are worse off.

Manulife provides financial solutions to more than one in five Canadians with a wide range of financial services and products, he said, and one of our key goals is to help them make better financial decisions.

“We always encourage people to work closely with an advisor and stick to a financial plan,” Mr. Rooney added. “People with integrated financial plans, working with strong, reliable and trustworthy companies, are generally better prepared for the future, are more confident about reaching their goals and can deal with the ups and downs in the economy.”

Overall index

The 48^th quarterly Manulife Investor Sentiment Index fell back six points in mid-December mainly driven by less interest in investment real estate, equities and balanced funds.

The index closed out 2010 at +20, two points ahead of its level a year ago, following some wide swings earlier in 2010 – particularly an eight-point drop in June on the heels of a record leap of 15 points in March, the biggest gain since 1999.

The quarterly index monitors how Canadians say they feel about investing in 11 different categories and vehicles. The index reflects the percentage of those who say they believe it is a good or very good time to invest minus those who feel the opposite.

Since its launch in 1999, the Manulife Investor Sentiment Index has remained in positive territory overall.  It peaked at +35 in early 2000, but fell to +11 in December 2001. During the past several years, the index had generally remained near six-year highs, above +20. But the index suffered a sharp drop in late 2008, to reach an all-time low of +5.

In the most recent survey, all 11 categories covered in the poll lost some ground. The largest declines in the latest survey were for Registered Education Savings Plans, segregated funds, investment property, stocks and balanced funds.

Principal residences still remain the most popular investment category – with a wide lead over every other area.

Highlights

The Manulife Investor Sentiment Index is based on the following six investment categories, shown by order of their overall ranking in the survey.

• Investing in their own homes (either through renovations or paying down the mortgage) remains the most popular place for Canadians to put their money – a consistent finding since 1999. The index for investing in their own home fell back three points in December to +56. The index reflects 66 per cent of those surveyed who said it’s a good or very good time to invest in their own residence — minus 10 per cent who believe it’s a bad or very bad time. The remainder was undecided.
• Investment real estate fell back eight points in December, but held its lead over cash and fixed investments. Investment real estate, at +22, still was up from a year ago when it fell to negative territory, which it had seen only twice since the survey began.
• Balanced funds ranked third among most-popular investment targets, despite falling back six points.  Now at +18, the latest index for balanced funds reflects 41 per cent who felt they are a good or very good place to invest, compared to 23 per cent who said the opposite in September.
• Fixed income investments held at fourth in the survey, at +14, after a five-point drop from the previous quarter.
• Cash (including savings accounts) remained above its traditional last place among popular places to put money, at +12, down three points from the last poll. Over the longer term since 1999, cash traditionally had been the least preferred place named by Canadians to leave their money. Then it showed a sharp rise since late 2008, as the economy weakened and other products fell out of favour.
• Equities lost six points from the last quarterly survey and reflected a split view on equity markets. In the December survey, it came to rest at zero.  The stocks index reflects 31 per cent who said it’s a good or very good time to invest in stocks, either directly or via mutual funds, while 31 per cent saw equities as a bad or very bad choice. Another 22 per cent felt it’s neither a good or bad time to buy shares.

Investment Vehicles

As well as evaluating the six investment categories, the same question was asked of five investment vehicles.

• Tax-free savings accounts, which were added to the survey earlier this year, held the top spot above RRSPs and RESPs.  Almost two-thirds of those surveyed (64 per cent) said now is a good time to choose a TFSA, compared to only 12 per cent who were negative.
• Among Canadians’ other favourite vehicles, Registered Retirement Savings Plans climbed ahead of RESPs in December, to reach +46 in this latest poll, off one point from September. Some 62 per cent of those surveyed said now is a good time to invest through RRSPs compared to 16 per cent who disagreed.
• Registered Education Savings Plans lost 13 points from the previous poll. At +39, the latest results for RESPs reflect 53 per cent of respondents who feel it’s a good or very good time to put money into an RESP, while 14 per cent said they feel it is a bad or very bad time.
• Segregated funds fell back 11 points, to reach +14, and were tied with mutual funds in the poll. Segregated funds were favoured by 38 per cent of respondents, while 24 per cent leaned the opposite direction.
• Also at +14, the index for mutual funds lost six points from September. Mutual funds were hit hard in surveys in late 2008, when the index suffered a 31-point drop.   The latest mutual fund index reflects 37 per cent who say now is a good or very good time to invest in mutual funds, while 23 per cent considered it a bad or very bad time to invest in mutual funds. Another 23 per cent felt it was neither a good or bad time for funds or did not know.

The poll by Research House was conducted with 1,000 Canadians aged 18 and older, between December 9 and 15, 2010.  The results have a margin of error of +/- 3.1 percentage points, 19 times out of 20.

About Manulife Financial

Manulife Financial is a leading Canadian-based financial services group operating in 22 countries and territories worldwide. For more than 120 years, clients have looked to Manulife for strong, reliable, trustworthy and forward-thinking solutions for their most significant financial decisions. Our international network of employees, agents and distribution partners offers financial protection and wealth management products and services to millions of clients around the world. We provide asset management services to institutional customers worldwide as well as reinsurance solutions, specializing in life and property and casualty retrocession. Funds under management by Manulife Financial and its subsidiaries were Cdn$474 billion (US$460 billion) as at September 30, 2010.

The Company operates as Manulife Financial in Canada and Asia and primarily as John Hancock in the United States. Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘945’ on the SEHK. Manulife Financial can be found on the Internet at www.manulife.com.

Manulife Investor Sentiment Index

Media contact:
Tom Nunn
Manulife Financial
1-877-782-2363
tom_nunn@manulife.com