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“Anybody can walk in and say, ‘I want to make an investment,’ and there are no rules in place that say [advisors] have to look at your debt ratio,” says John Moakler, president and certified financial planner at Moakler Wealth Management Inc. in Toronto. Most of his clients are doctors and dentists, who tend to have massive levels of student debt.
Regardless, as annual interest rates on student or consumer loans can top 10 per cent, for example, and even exceed 20 per cent on outstanding credit card balances, it’s vital advisors help their clients set up a plan to pay off debt as soon as possible. “It shows them the trade-off between paying down the debt versus paying down the debt and investing at the same time,” he says. “There’s usually a happy medium in there.”
While household debt levels have dropped slightly since the onset of the pandemic, Canadians have never been more mired in it. The current figure of $1.77 owed for every dollar of income was less than 90 cents in the 1990s. While low interest rates have been the catalyst for Canada’s ballooning household debt, Ms. Campbell says the combination of falling incomes during the pandemic and the promise of interest rate increases from central banks this year could spell disaster for many households.
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