As Canada emerges from the pandemic, its various industries are spinning back up, hoping beyond hope that their businesses not only recover, but come back stronger than ever. Without our small businesses, we don’t have anything.
To that end, we’ve spoken to eight businesspeople across a cross-section of Canadian financial-based businesses, from trustees to loan providers to mortgage brokers, and asked them one question: What does the New Normal look like for them?
- Carl Rumanek – Rumanek & Company, Ltd. | Twitter Profile
Founder & CEO
- Victor Fong – Fong and Partners, Inc. | Twitter Profile
- Cris Ravazzano– Loans Canada | Twitter Profile
Chief Technology Officer
- Jay Goldberg – Canadian Taxpayers Federation | Twitter Profile
Interim Ontario Director
- Stephen Weyman – Credit Card Genius | Twitter Profile
- Angela Calla – Angela Calla Mortgage Team | Twitter Profile
- Jordan Bishop – Yore Oyster | Twitter Profile
- Janine Rogan – JanineRogan.com | Twitter Profile
The future for our industry is unknown at best. The world will not emerge from the pandemic in the near future as the coronavirus continues to mutate around the world.
Governments will continue to spend money they do not have in the name of “fighting the virus.”
Social programs will continue to be expanded and government payments to marginalized groups will continue. People will get further into debt, but as long as they continue to receive government money, they will not have the need to file bankruptcy or file a proposal to their creditors.
Trustees and financial counsellors will do most of their business via telephone, video, zoom meetings, etc.
In-person initial meetings will likely drop to +/- 35 % of total volume and less than that for signing papers and almost nil for counselling.
Trustee staff will work mainly from home and work from shared office space perhaps one or two days a week.
Trustees will reduce their office space and allocate the savings into advertising trying to get a bigger slice of a shrinking pie.
Might also see some small trustee offices merge or join larger firms – I know that the average age of trustees is high – this might be a way that older trustees can get their work in the process out of their files.
It is expensive to stop taking on new files, let front-end staff go, maintain the office space and keep back-end staff to close files. The new normal is frightening to some extent; planning is critical.
The Covid-19 pandemic has led to a significant decline in insolvency filings due to Government of Canada’s financial programs introduced over the past year to assist Canadians through the concurrent health and economic crises.
This has led to significant drops in revenue among Licensed Insolvency Trustee firms. My view is that smaller Trustee firms will be unable to survive in their current state and will likely merge with bigger firms.
We saw a big dip in demand for personal loans early in the pandemic, but things recovered a lot faster than we expected them to. A lot of lenders closed their doors early in the pandemic, but it only took them a couple of months to open up again. From our perspective, by early summer last year, demand was almost back to normal and things have stayed consistent across Canada since. All of this despite the multiple lockdowns that have taken place in Canada’s largest provinces.
We think a lot of this is due to government assistance programs related to COVID-19. That said, we’re keeping an eye out of increased insolvency rates this summer as we expect these assistance programs to come to an end with increased vaccination rates and hopefully the end of the pandemic.
A Debt Crisis on the Horizon
Once Canada begins to emerge from the pandemic, and the economic crisis that accompanied it, Canadians will be waking up to a new reality of heavy government borrowing and ever-increasing government debt. The federal budget that was presented in April projects that by 2025-6, interest on our federal debt will hit $39 billion a year. That projection was made with the assumption that interest rates will remain low. For context, $39 billion is more than twice our national defence budget. With $39 billion, the federal government could also reduce the GST from five per cent to one per cent. These are some of the very real impacts of government debt, but the numbers could get even worse. Interest rates could increase in the years ahead. Betting on low-interest rates is a gamble, but it’s a roll of the dice that our governments have decided to make.
While Canadians understand that the present pandemic is a unique circumstance, and short-term government spending on essentials like health care is necessary, our governments appear to be using the pandemic as an excuse to increase government spending over the long term. The government of Ontario does not expect to balance the budget for at least nine years, while the federal government has no plans to do so. In the years ahead, Canadians will have to deal with run-away spending that we simply cannot afford. Hardworking taxpayers know that public debt will ultimately have to be paid for through higher taxes or major spending cuts down the road. Our governments cannot continue to borrow at this rapid pace. Every Canadian now owes over $30,000 in public debt, and that’s just at the federal level. As we emerge from the pandemic, taxpayers must challenge our governments to make hard choices today to protect our future tomorrow.
Once Canada emerges from the pandemic and the borders start opening back up, I think we’ll see a resurgence in demand for travel credit cards and rewards. We did an analysis of shifting credit card trends due to the pandemic back in May 2020, and found that demand for travel credit cards fell more than 20% while cash gained nearly 20%. People shifted from saving up for future travel to wanting rewards they can use more immediately to help them through tough times. And that’s understandable – it was unclear at the beginning of the pandemic just when we would go back to normal life. But now that more and more people are being vaccinated, travel and the other luxuries of life are on the horizon again. Now people can turn back to travel credit cards and start saving up for future trips. That said, a lot of us have a new perspective on travel and may still be a bit hesitant to go on big trips for a while. It’s possible Canadians will stick to the simplicity of cash-back credit cards instead of switching back to travel. But I believe many people will be itching to go on those trips they’ve been putting off for more than a year.
Canadians, more than ever, are understanding the benefit of using a mortgage broker. While we have all gone through unprecedented times, we, as brokers, have had the ability to review how all lenders are handling system changes, regulation changes, and government incentives all together. Borrowers are more at ease working digitally, and in a large organized manner, to communicate changes and impacts of the market in a quick and efficient way. At a time when it’s needed most, our methods have been reassuring borrowers with the value a broker provides.
Canadians have a deep desire for financial literacy and empowerment. It’s been surveyed that 7 out of 10 Canadians live paycheck to paycheck. The pandemic has raised a lot of talk around financial health and stability, causing them to engage and learning more about the system, how brokers work for their client’s best interests, and how we can help them with other financial planning alignments to encompass overall financial health.
Moving forward, consumers who value improving their overall wealth and financial health with every aspect available to them through the empowerment of knowledge, know that working with an unbiased party will be most important to them. For example, a mortgage professional will help guide Canadians to consider if they have six months of living expenses aside, or ensure that is addressed when their mortgage is due. Missing that aspect upon renewal is a common mistake when borrowers are fixated on the interest rate for renewal and not a holistic wealth-building/protecting approach.
Adapting to change is constant, and those who are most comfortable with that are leaders in helping others navigate it. When selecting a professional to partner with, asking them how they assist borrowers in navigating change with a proactive plan in place will help ensure you make the right decisions to be set up for financial success.
I expect the new normal to be what many personal finance gurus have been advocating for years: higher savings rates, lower levels of consumer debt, and more people taking control of their careers through side hustles and freelance work. At the same time, I expect we’ll see elevated levels of travel for at least several years, since we now recognize that long-term border closures are not an impossibility. Sometimes it takes a crisis for us to take a long, hard look at our habits, and I believe this is one of those times. As Winston Churchill famously said, “Never let a good crisis go to waste.”
In my industry, the new normal will include a lot more working remotely, as well as people more focused on managing their money and investing. We’ve seen a lot of up and down market swings, and individuals interested in crypto – it’s great to see the millennial generation taking more of an active role in managing their money.
Even as the pandemic loosens its grip in most regions, we can’t say for certain what will happen across industries. The new normal can be different for everyone. From working at home more to the possibility of decreased consumer debt, the outlook seems positive. Increases in travel can contribute substantially to the nation’s economic outlook. And the demand for loans is going down. Still, if there’s one thing we’ve learned from the pandemic, it’s that anything is possible.