SEYMOUR MANAGEMENT CONSULTING INC. RELEASES OCTOBER SEYMOUR FINANCIAL RESILIENCE INDEXTM PROVIDING A DEEP DIVE ON THE FINANCIAL RESILIENCE AND
VULNERABILTY OF CANADIANS DURING COVID-19
Over 18 million adult Canadians are not ‘Financially Resilient’, with the financial health and resilience gap widening between June and October
A unique Index and the first of its kind in the world, the Seymour Financial Resilience IndexTM Index measures a consumer or household’s ability to get through financial hardship, stressors and shocks as a result of unplanned life events based on nine behavioural, sentiment and resilience indicators. The index measures a households’ ability to bounce back from financial stressors and shocks at the national, provincial, segment and individual household levels, including for Big Five bank customers. The Index is comprised of four “resilience segments” – “Extremely Vulnerable, Financially Vulnerable, Approaching Resilience, Financially Resilient.”
“We created the Index because we wanted to bring to light the behaviours, sentiments and factors affecting Canadians’ financial resilience,” says Eloise Duncan, CEO and Founder of Seymour Management Consulting Inc. [‘Seymour Consulting.’] “The Index exposes the financial vulnerabilities of households during good and bad times, which can be contradictory or hidden from traditional measurements. Our data shows that as Canadians, we’re by and large dutiful in paying our liabilities and debts on time, but many of us have financial challenges underneath, that can influence our ability to get through financial stressors or shocks; influence our relationship to money or have impacts on our current and future behaviours.”
The Index, and FHI dataset, provides a new macro-lens for policymakers, economists, bankers, lenders and other organizations on the changing financial resilience of households, including for example, those who have or haven’t experienced job losses and/or reduced hours as a result of pandemic impacts, and who have or haven’t accessed Government COVID-19 financial relief or mortgage or loan deferral programs from their Financial Institutions.
Adds Duncan, “Using the iceberg analogy, financial resilience is what is under the water and not generally visible. It can be large (Financially Resilient) or small (Extremely Vulnerable). The index and financial resilience score shines a light under the water to see just how resilient we are. It can be a tool to help inform and guide Financial Institutions, Governments and other organizations across our ecosystem to support their customers, citizens, key populations and communities in a more meaningful and targeted manner.”
Developed over four years by Eloise Duncan, CEO and Founder of Seymour Consulting and her team, the Index is complemented by the longitudinal data and measurement on the financial health of Canadians, based on Seymour’s Financial Health Index [FHI] studies survey data.
“The Index provides a financial resilience score from 0-100, across the four financial segments from “Extremely Vulnerable” to “Financially Resilient”, with “Financially Resilient” households representing only 28% of the adult Canadian population, and all income demographic groups represented across all four segments[i],” adds Duncan. “What we’re seeing based on the October index is increasing financially vulnerability particularly for households impacted by job losses and/or reduced hours, which are disproportionately impacting ‘Extremely Vulnerable’ and’ Financially Vulnerable’ households. Based on our data, of concern is how some households, despite working harder to adjust their behaviours to make ends meet and having accessed Government COVID-19 support and/or payment deferral programs or other help to bridge through, are still falling behind, with their financial resilience scores worsening. Incidentally more of these people are also feeling less well supported by their primary Financial Institution, and/or are having difficulties in accessing financial services, education, advice or help.”
The October Index release shows how Canadians’ sentiments and consumer and financial behaviours are changing in the first eight months of the pandemic with real differences by province and across the four financial resilience segments
- 67% of Canadians agree that the pandemic has made them re-think their relationship with money, and 33% now worry often about having their household income reduced as a result of COVID-19 or a future recession.
- 63% of households have significantly reduced their non-essential expenses in October, up from 61% in June and 42% of households have drawn down on their savings, up from 30% in June.
- 15% of households report saving significantly or moderately more now compared to pre-pandemic (but this is 31% for Financially Resilient Canadians) whereas 51% of Financially Vulnerable and 41% of Extremely Vulnerable households respectively are saving significantly or moderately less.
- Canadians have been creative in other ways to reduce their expenses and make ends meet, with 9% moving house or changing accommodation to reduce living expenses; 17% having sold or pawned something to get by and 11% having deferred utility payments.
- Many Canadians are paying down debt or consolidating their debt and reducing their borrowing for everyday expenses. That said, 27% Canadians reported that they worry often about managing their overall debt load in October.
The Index shows many differences in the financial resilience scores, behaviours and vulnerabilities for different demographic groups; also based on different financial stress/ wellness, resilience/ vulnerability and consumer and financial health indicators tracked since 2017. For example, as of October, Extremely Vulnerable households are working much harder than ever to make it through – with 80.7% if them reported having significantly reduced their non-essential expenses, up significantly compared to 70.3% in June. 43.6% have had to increase borrowing for everyday expenses (up from 31.4%) and 66.2% have drawn down on their savings, compared to 49.7% just three months prior.
Some of the key insights from the October 2020 Seymour Financial Resilience IndexTM include:
- The mean national financial resilience score for Canada is 54.53 in October, up from 49.58 based on the February baseline (pre-pandemic). This means that overall, Canadians are ‘Approaching Resilience’, i.e. reporting financially resilient outcomes across some (but not all) of the indicators.
- The October Index shows an increase in ‘Extremely Vulnerable’ households by 700,000 households and increase in ‘Financially Vulnerable’ populations by another 340,000 households between June and October, with these two segments combined representing 10.64 million adults. As of October, 28% of adult households (7.22 million Canadians) are ‘Financially Resilient’ with a financial resilience score of 70.01 or more.
- Women, renters, single-parent families, part-time workers, low income Canadians, those not working owing to a disability, and those affected by job losses or reduced hours as a result of the pandemic have been negatively impacted in terms of their financial resilience, amongst others. The mean financial resilience score of small business owners and self-employed Canadians has also declined between February and October.
- 77% of households report having excellent, very good or good credit scores in October, but of these only 35.7% are Financially Resilient based on their financial resilience score, with 36% ‘Approaching Resilience’ and ‘21%’ Financially Vulnerable. Of these same borrowers with strong self-reported credit scores, 63.4% are living pay-cheque to pay-cheque, 31.5% report their household income has declined by more than 25% since the pandemic started, 45.1% have had someone in their household affected by reduced hours and 50.2% have had to draw down their savings to make ends meet.
- As of October, 52% of Canadians reported that financial hardship and/or isolation have significantly impacted their mental health; 45% report that money worries make them physically unwell and 38% report that money worries impacts their performance or productivity at work. These impacts are much more extreme for Extremely Vulnerable Canadians.
- All households that have accessed Government COVID-19 financial relief since the pandemic started are less financially resilient than households that have not accessed relief, for all household income demographic groups apart from Canadians with household income under $25k. October data highlights that Government relief is certainly helping many Canadians to bridge through financially.
- 86% of Canadians agree that their household is now more aware of the importance of establishing or improving their financial resilience, and 53% report that they now have new and/or higher expectations around how their Financial Institution could ‘have their back.’
- Customer resilience at The Big Five banks have different distributions represented across the four financial resilience segments. CIBC and BMO have seen the highest increases in their mean customer financial resilience scores at the national level between February (pre-pandemic) and October, followed by RBC, TD and Scotiabank. All banks will have worked hard to support their customers facing financial hardship through the pandemic, and nuances in terms of how best to support their financial resilience can be analysed through the Index.
- From a financial wellness customer support perspective, there are differences across the banks, but at the national level, all bank customers rated their primary financial institution less highly in terms of helping to improve their financial wellness in October 2020 compared to June and February: 40% rating their primary FI as good or excellent (7-10), compared to 51% in February (pre-pandemic) and 58% in 2018. BMO followed by CIBC and TD have the highest proportion of customers who rate them as good or excellent at helping to improve their financial wellness, based on Seymour’s independent tracking.
The next release will be based on February 2021 data, with Index tracking every four months.
For more information about Seymour Consulting and the Index, visit https://www.finresilienceinstitute.org
About Seymour Management Consulting Inc.
Seymour Management Consulting Inc. is a Canadian financial services consulting firm founded in 2009. We are the leading independent authority on financial health in Canada and members of the C.D. Howe Institute. Through our team of experts and partners, and by applying the Seymour Financial Resilience Index TM, we deliver measurement, research and analytics, strategic consulting and collaborative innovation. Our vision is for financially healthy, resilient Canadians. Our core purpose is to help measurably improve Canadians’ financial resilience and well-being, by collaborating with Financial Institutions, Government and committed institutions to better support the financial resilience of their customers, employees and target populations at scale.
[i] The Financial Health Index study is an online survey conducted with Canadians aged 18-70 years old with data representative of the Canadian population by province, age, gender and household income. The October 2020 Financial Health Index [FHI] study has a sample size of 3016 and an Index sample size of 2635 Canadians. MOE of +/- 1.78% and 95% confidence interval across all provinces. The June FHI study has a sample size of 4989 and an Index sample size of 4462. The February FHI study has a sample size of 1013 Canadians and an Index sample size of 919. The 2017 and 2018 FHI studies were conducted with adult 5000 Canadians and the 2019 FHI study with 3000 adult Canadians. Recruitment of respondents is through the Angus Reid Forum with all Index analysis conducted by Seymour Consulting.