U.S. Trade Representative Jamieson Greer confirmed Wednesday that Washington has chosen not to renew its trade deal with Canada and Mexico “in its current form.”
As set out in the Canada-U.S.-Mexico Agreement (CUSMA), which came into force in 2020, leaders from the three countries met Wednesday for a mandatory joint review to discuss whether to formally extend their trilateral trade agreement for another 16 years.
The U.S. administration’s decision to not renew the agreement was widely expected, but it ushers in a decade of annual reviews that could prolong uncertainty around North American trade. Combined with conflicts in the Middle East and Europe, the decision adds to a steady stream of geopolitical uncertainty that advisors say is weighing on some investors, even as stock markets reach new highs.
Financial advisors say they’re working hard to help clients separate short-term noise from long-term strategy.
“It puts more pressure on the portfolio manager or the advisor to make sure that there’s consistent communication with clients, so that you’re able to control the narrative of what’s going on,” said Michael Zagari, portfolio manager with Wellington-Altus Private Wealth in Montreal.
“Because there’s a lot of things that are going on, there’s a lot of noise, and [clients] don’t necessarily piece it together.”
A recent poll from Fidelity Investments Canada ULC found that 47% of advisors say clients are raising concerns about trade policy, tariffs and their potential impact on household finances, investments and job security. The poll was conducted during a June 11 webinar and included between 360 and 642 advisors, depending on the question.
Wes Ashton, a senior portfolio manager with Harbourfront Wealth Management in Vancouver, said the CUSMA review hasn’t generated many client conversations yet because of the volume of competing headlines. He expects, however, that more clients will begin asking how the evolving trade relationship could affect their financial plans.
“Over the last 18 months, we’ve had a lot of major headlines that investors and clients have had to deal with, you know, going back to trade and tariffs last year, … geopolitical risks and then increasing inflation most recently,” he said.
Zagari’s experience has been similar. This year, clients have been more focused on news in the Middle East, particularly its potential impact on inflation and global supply chains.
His Ontario-based clients are more anxious about CUSMA than clients elsewhere in the country, as they’re more invested in the fate of the province’s auto industry, which is heavily dependent on trade with the U.S. and Mexico.
Still, fewer clients are reaching out about trade disruptions, Zagari said.
“They’re numb to the conversation about tariffs, they’re numb towards uncertainty. They’re not used to certainty anymore,” he said.
Cutting through the noise
Seven in 10 advisors who participated in the Fidelity poll said they were helping clients separate short-term headlines from long-term goals. Sixty per cent said they were reinforcing diversification across sectors and regions, and 40% were reviewing retirement and income plans.
Fewer advisors were stress-testing portfolios against different trade scenarios (18%) and increasing focus on liquidity and emergency savings (12%).
Ashton and Zagari have been doing a combination of these things.
Both highlighted the need for consistent and proactive communication with clients to keep them focused on long-term goals.
“We very much believe that we need to communicate on a regular basis,” Ashton said. He sends out weekly market commentaries and quarterly newsletters, and his firm holds monthly information sessions to update clients and remind them that volatility is a natural part of investing. His team also makes itself available to answer client questions.
“It’s about talking to them about what’s actually happening versus what could happen, because investors always think about the worst-case outcomes in any situation. The reality, in most cases, is the worst-case outcome is never the final outcome.”
Zagari has maintained the same communication cadence throughout the recent period of market volatility. Every Friday at 1 p.m., he emails clients a market commentary, while additional updates cover major developments and industry conferences. His team also responds quickly to client inquiries.
But, as both Ashton and Zagari noted, there’s a balancing act advisors must play with client communications to ensure clients aren’t finding new reasons to worry.
Historical perspective also helps.
“We remind them that these events are not new,” Ashton said.
Stress-testing how different scenarios may impact a client’s financial plan can be equally valuable.
Using projections that incorporate changes in inflation, oil prices and consumer spending, Zagari said he shows clients how “a volatile world” could affect their personal financial plans.
“They’re more receptive. Their engagement levels are off the charts, because you’re basically talking about them and them alone, and they’re getting all the answers that they’re looking for,” he said.
For advisors new to financial planning, Ashton and Zagari stressed the importance of a pragmatic approach.
“Our job isn’t to predict the next headline, rather it’s to prepare portfolios for whatever headline comes next,” Ashton said.
Remind clients that long-term, diversified investment strategies have performed well through multiple market cycles.
“It’s really important to provide a good experience by taking that more pragmatic approach.”
Maintain frequent communications with clients, be ready to field questions and provide behavioural messaging to keep them on track.
“Be that sounding board, and if you have a process when the markets are good, then I would suggest sticking to that process when the markets aren’t great,” Ashton said.