Self employed Wealthier, More Financially Literate

Wealth advisors looking for the ideal client to work with should develop new relationships with the self-employedóa large and vibrant market for financial services. There are 2.7 million Canadians, or 16% of the entire workforce, reporting self-employment as their main job in 2010.

The self employed have twice the wealth as other households in Canada and, as a result of their higher motivation to manage that wealth, better financial literacy as well, according to a summation of data released by Statistics Canada from the Survey of Labour and Income Dynamics, the Survey of Household Spending and the Canadian Financial Capability Survey.

The median net worth of the self-employed was $520,000 in 2009, 2.7 times the median of $195,000 for paid employees, according to the summation released on September 23, 2011. Yet, the median household income of the self employed amounted to 81% that of paid employees. The self employed may leave funds in their businesses for reinvestment purposes or as a reserve fund, thereby reducing income at the same time as they are increasing net worth.

There are other important differences in dealing with the self employed. They tend to work longer and therefore plan to retire later than employees: about 74% of the self-employed reported that they were preparing for retirement, compared to 85% of paid employees. That could point to a greater need for critical illness, disability or life insurance to protect the business and/or family with financial support if the owner-manager becomes ill or dies.