As the economy begins to recover from the COVID-19 crisis, prospects are looking particularly bright in Alberta. That’s a sea change from recent years when a struggling energy sector and pandemic-related lockdowns hampered the province’s economy, and financial advisors were focused on helping clients navigate severance payouts and financial uncertainty.
A recent report from the Conference Board of Canada says that the resumption of normal operations in resource production and manufacturing, along with increasing global oil prices, will lead to gross domestic product growth of 7.2 per cent for Alberta in 2021 and 5.6 per cent in 2022.
Already, the price of a barrel of oil has risen to around US$70. And, according to a recent Statistics Canada report, “Natural resources is the industry furthest along in its post-COVID recovery, with employment surpassing February 2020 levels by 29,000 (a 9.3 per cent increase). The recent gains have also erased most of the losses associated with the long-term downward trend recorded from March 2019 to February 2020.”
Even in these bullish times, advisors can help clients stick to the fundamentals while stretching their financial wings. In particular, the volatile job market still requires advisors to help clients to plan for sudden downturns, and ensuring clients’ portfolios are diversified properly is still an important long-term strategy.
When it comes to investing, many Albertans have been reassessing their concentration in the oil and gas sector after the roller coaster ride of the past few years, says Katherine Ross, portfolio manager with the private client group at Raymond James Ltd. in Calgary.
“I have not had one client say we should be getting in on this oil and gas move,” she says. “This year, diversified portfolios are outperforming and responding to the current environment.”
But there is still potential in holding some oil and gas investments, given the higher demand and rising oil prices as the world opens up following the pandemic, she says.
Mitch Vandemark, co-founder and managing partner at Rubbix Risk and Wealth Management Inc. in Grande Prairie, Alta., says he sees the merit of tapping into the oil and gas sector’s recovery.
“You can be diversified in your portfolio, but everyone can agree ... oil and gas stocks have skyrocketed significantly [recently],” he says.
One approach that advisors and investors can take, Ms. Ross says, is to be selective about which companies in this sector they choose to invest in.
“The trend toward ESG investing, zero-carbon emissions, and electrification of cars are firmly in place and unlikely to reverse,” she says. “Investors should maintain or add exposure to energy producers that recognize the ESG trends and have a plan to make transitions to meet this need.”
James McCreath, portfolio manager with the McCreath Group at BMO Nesbitt Burns Inc. in Calgary, also says oil and gas still merit consideration. He doesn’t discount the wishes of Albertans who want to invest in their backyard – and there are options worth considering if they want to look outside the oil and gas sector.
“A great example would be something like TransAlta Renewables Inc. RNW-T, which is a Calgary-based company that operates in the renewable power space,” Mr. McCreath says.
It’s more difficult for the average investor to jump on some of the promising new sectors in Alberta’s diversifying economy, he adds. In particular, many tech firms in the province are still privately held.
Beyond the investment discussions, there are plenty of other topics that advisors in Alberta are having with their clients. For example, Mr. Vandemark says he is encountering clients who want to spend the money they’ve saved in the past year on travel thanks to the resurgent economy and after a year of restrictions stemming from the COVID-19 pandemic.
“If they couldn’t travel for two years and that’s what they like doing, their mental health has to come into it. You can’t just say, ‘Save, save, save,’” he says.
Still, Mr. Vandemark says that in addition to a nice getaway, clients should consider putting their excess money into a registered retirement savings plan.
On the flip side, the shock of the pandemic has taken its toll on some clients, Mr. Vandemark says, noting that some are concerned about the future. They want to plan accordingly and be protected if something unforeseen were to happen again.
“So many of them are asking, ‘Is this over? Are we going to experience another [pandemic] in a couple of years?’ If this ever happens again, [they] don’t want to rely on the government [benefits],” he says.
Kelly Kotello, a financial planning specialist at RBC Wealth Management Services in Calgary, says her clients remain wary of job losses after woes in the oil sector that began in 2014 and the disruption caused by the COVID-19 pandemic.
“Before this downturn happened, people thought, ‘I have a job, I’ll always have a job, and if I lose this job, I can get another one that’s equivalent,’” she says, adding that many people are not so sure they can get the same amount of income if they need to switch jobs.
As a result, some of her clients are looking to upgrade or change job skills. Ms. Kotello is a fan of the tax-free savings account and encourages its use for clients who want to save for an emergency or who want to save for retraining.
“It’s a great place to save for an emergency fund, for education. If circumstances change, you have a nest egg you can rely on,” she says.