New Data Aides Financial Planning, Fundraising, Marketing and Merchandising
On August 25, 2015, Environics Analytics (EA), the marketing services and data analytics company, announced the release of WealthScapes 2015, the most comprehensive database available on the assets, liabilities and wealth of Canadians. The latest edition has been expanded this year to include 178 key financial and investment statistics, including new categories of data such as employer pension plans, tax-free savings accounts (TFSAs) and registered retirement savings plan (RRSP) contributions.
Now in its eighth year, WealthScapes has proven to be a valuable tool for helping financial institutions, charitable organizations and large retailers better understand the financial and investment behaviour of their customers. Banks and investment companies use the database to market and calculate market share and potential sales for specific products like mortgages, mutual funds and GICs. Universities and charities use it to identify high-value donors from fundraising lists and areas that may be home to prospects with sizable investment portfolios. Retailers and real estate developers draw on WealthScapes data to plan commercial and residential developments and attract retail tenants.
As with previous releases, WealthScapes was built using sophisticated modelling techniques and aggregated, privacy-compliant, small-area data from a variety of authoritative sources, such as the Bank of Canada, Equifax and Statistics Canada. Applicable to every six-digit postal code in the country, the variables used in WealthScapes have been created to match the best available control totals in Canada so that they will be accepted by Chief Economists.
This year, EA added more than 50 variables to WealthScapes 2015, and users now have access to previously unavailable data on TFSAs, private pension values and RRSP contributions. The new data enhance such standard variables as income and income distributions, disposable and discretionary income, savings by type, investments by type, RSP components, mortgages, loans, lines of credit and credit card accounts. The expanded dataset provides users with more details into the financial health of Canadian households to help them develop differentiated marketing strategies, targeted products and effective messages that address customers’ changing needs.
“The new numbers indicate that Canadian household balance sheets are in good shape,” says Peter Miron, senior research associate at EA and lead developer of WealthScapes 2015. The database shows that net worth rose 6.1 percent during 2014 while debt remained in check, increasing only 2.9 percent; at the same time, real estate values grew 5.0 percent, indicating a solid but not overheated market. “These data are relied on by the financial sector and are becoming increasingly valuable to marketers and analysts in all industries,” adds Miron.
Among the noteworthy stories coming out of the WealthScapes 2015 release:
- Vancouver, Calgary and Toronto Still the Wealthiest Cities. This trio of large cities retained the title as the wealthiest in Canada, with an average household net worth of $867,817, $835,823 and $826,883, respectively. The gap between the top three cities widened slightly, with net worth growth in Vancouver increasing by 8.8 percent. The next three cities with the strongest net worth growth were Edmonton at 8.4 percent, Toronto at 7.5 percent and Calgary at 7.0 percent. Vancouver continues to reign as Canada’s wealthiest city because of its pricey real estate—averaging $611,800 per household compared to $555,341 in Toronto and $524,737 in Calgary. In Canada’s most populous city, Toronto, growth in both real estate values and pensions helped push net worth up, while Calgary benefitted from a 7.1 percent increase in its real estate holdings. And Edmonton shot up to the second fastest growing city in terms of net worth because of its 7.3 percent increase in liquid assets—second only to Vancouver—which was driven largely by high rates of saving. While Toronto households withdrew $1,935 on average from their savings in 2014, Edmonton households socked away $4,290 on average.
- Ottawa and Quebec City are Canada’s Pension Capitals. Pensions serve to level the wealth playing field: while some cities have particularly high concentrations of real estate and liquid assets, most cities share very similar levels of employer pension plan entitlements. The exceptions are cities with large public sector workforces, like Ottawa and Quebec City, where employer pension plans represent significant share of household net worth. In Ottawa, pensions grew 8.2 percent to $192,330 per household in 2014—the national average is $119,468—thanks mostly to concentrations of government and Crown Corporation employment. Meanwhile, residents in Quebec City experienced a similar story, with pension values increasing 6.1 percent to $158,906, likely attributed to provincial or national pensions. Residents of Windsor and Hamilton also reported growth in pensions, though most are related to the industrial sector.
- The Rich Got Richer. The three wealthiest provinces at the end of 2013 retained their top status at the end of 2014 and their net worth grew the most of all provinces: Top-ranked British Columbia grew 7.5 percent to $748,919, second-place Alberta rose 7.3 percent to $701,003 and third-place Ontario grew 6.7 percent to $681,600. Yet the data indicate different drivers behind these rising fortunes. B.C. remains the wealthiest in large part because its real estate values are much higher than the rest of Canada: $504,714 compared to Alberta’s $428,671 and Ontario’s $420,356. Albertans’ net worth rose largely due to stock market appreciation. But in Ontario, where households tend to be more conservative with their liquid assets, residents withdrew less and speculated less than in Alberta and saw strong growth in pensions.
- Where the Savers Are. Households in most provinces drew down their liquid assets in 2014—an average $2,901 per household nationwide—but not in British Columbia and Newfoundland and Labrador. Households in B.C. socked away the most last year—$3,705 per household—while those in Newfoundland and Labrador had net savings of $1,075. In B.C., much of the savings appeared concentrated in Vancouver, where pricey real estate requires significant down payments and has discouraged many households from investing in real estate. In Newfoundland and Labrador, residents had a strong economic year thanks to the booming mining, oil and gas sector, and saw average household incomes rise 4.7 percent—twice the national average. “In 2014, Newfoundland and Labrador was firing on all cylinders,” says Miron. “And residents chose to squirrel away a lot of that newfound money into savings.”
- Keeping an Eye on Debt. With average credit card debt rising only 0.3 percent in 2014—much lower than the 1.5 percent rate of inflation—Canadians seemed to be kicking their plastic habit. They were similarly reluctant to draw on lines of credit; those balances declined by 1.1 percent. However, personal loans, which include auto loans, student loans and debt consolidation, increased by 5.2 percent. The growth in installment debt appears to have come at the expense of revolving credit and could be seen in a positive light as Canadian households seek to lock in current low interest rates.
What’s Next. While 2014 checked in as an up year overall, the serious economic headwinds that are affecting the Canadian economy in 2015 have not yet spread to Canadian household balance sheets. As of the end of the first quarter of 2015, real estate values and debt were similar to 2014 values, meaning there has been little change up or down. And while first-quarter 2015 data indicate liquid asset holdings are higher compared to last year, it is expected that stock market declines in the second quarter will temper this trend. As Peter Miron observes, “Our financial state of affairs is pretty good, but we are always dealing with a snapshot in time. With WealthScapes 2015 we can understand where we stand and then plan accordingly.”