CPAs can help boost societal mental health
It’s easy for CPAs to overlook the widespread influence that can occur through just their work. Their unique roles can lead to improvements in both mental and financial wellbeing, while contributing to the growth of local economies, and in doing so, making a substantial societal impact.
The findings of an IPSOS poll from September 2023 sheds some light on the emotional and lifestyle consequences of being in debt. Canadians who perceive their personal debt as terrible are more prone to experiencing increased stress (77%), anxiety (72%) and staying home more often (72%) to save money. “Canadians are feeling the pressures of our economy, with everything costing more and more,” says Michel Rodrigue, CPA and President and CEO of the Mental Health Commission of Canada (MHCC). “Particularly those who have mortgages or are hoping to find affordable housing.”
These struggling Canadians though, once economically stable, are likely to contribute more, which lifts the Canadian economy overall. CPAs, with their toolkit of financial solutions, can in turn help lead this change by taking on these clients who had been seen as high-risk. And recognizing a business opportunity, financial services companies and tech platforms alike, efforts are already in place aimed at improving the economic situation of this underserved segment, with results proving that it’s ultimately worth the risk.
One of the greatest impacts to the mental health has been the Pandemic, introducing a financial stressor, a health stressor and, on top of that, a social barrier. The anxiety affected financial decision making, according to research from PMG Intelligence, a market research and data science firm. President and CEO of PMG Intelligence Rob Grein says, Covid restrictions had an impact on decision-making—people were more willing to make uncomfortable or difficult decisions they would have avoided traditionally.”
It’s at this pivotal timeframe when a CPA’s work can be most impactful. “What we found was that people wanted to take control of their financial destiny. Their receptivity to financial advice grew and, with it, their financial literacy,” Grein says. “If you help people actually understand their finances and boost their financial literacy, they’ll feel more confident.” The end result, according to PMG Intelligence’s research is reduced stress—mental, physical and financial.
A study conducted by Risk Analytica for the MHCC, revealed just how widespread the mental health challenges are becoming among Canadians. The study showed that one in five Canadians will experience some sort of mental crisis, and by age 40, nearly half of the population will have experienced a mental health disorder.
At least one financial institution is working to expand its services to focus on individuals who need to liberate themselves from debt and predatory lenders. Operating under DUCA Financial Services Credit Union Ltd, DUCA Impact Lab operates as a recognized charitable organization and non-profit innovation hub. Its primary objective is to enhance banking services for everyone, with a particular focus on assisting people struggling with debt.
"You can have a really profound social impact on people's lives through banking if you do it in the right way," says DUCA’s Keith Taylor, executive director of DUCA Impact Lab. The Impact Lab, under his guidance, tests models like the Escalator Loan Program, challenging conventional notions about high-risk customers.
The Escalator Loan solution for those grappling with high-cost debt offers loan approval based on cash flow rather than credit score. Despite borrowers having lower credit scores and incomes, the program maintains a low default rate. It also includes a rebate system which reduces the interest rate and provides a financial buffer for borrowers.
DUCA’s business growth since 1954 has been due to a customer base who were viewed, on paper at least, as risky, according to Taylor. Yet these same people turned out to be excellent banking customers. “Without them, we wouldn’t have grown into one of the largest credit unions in Ontario [with 17 branches and over 87,000 members],” he adds. This credit disadvantaged and underserved segment makes up more than 9 million Canadians, per a global study by TransUnion.
Taylor adds that most Escalator Loan clients are from marginalized communities. “They're low credit, low income—almost all are women of colour with dependents, and have gone through some sort of life disruption,” he says “Since they've had a credit hit as a result, they've had to then take on predatory debt to manage that sudden transition because they couldn't get access to mainstream institutions.
In the U.S., Black and Latin households make up 31 per cent of the population while also representing 64 per cent of the unbanked and 47 per cent of the underbanked. While in 2020, the Trudeau government—in a targeted effort to combat systemic racism—launched an initiative to help Black Canadians get business loans with national banks. Now fin-tech apps, including banking, credit and investing platforms, have started to work to address these disparities. Financial service platforms like Chime focuses on assisting communities of colour and low-income individuals, offering tools to build credit profiles and reducing costs associated with traditional banking. Stock trading, typically associated with the more affluent who can afford to pay a broker, has now become an option for people with low incomes; fractional investing apps like Wealthsimple enable low-income individuals to invest in the stock market with minimal entry barriers—commission free and with accounts that can be opened with a no minimum deposit.
“As lower income people have additional income, they’re most likely to spend it within their local economies,” Taylor says, an economic impact known as the local multiplier effect. When money is spent locally, it circulates through the community, helping generate additional income and employment opportunities beyond the initial transaction.
As this creates a web of interconnected benefits, it also influences the social and cultural fabric of a community. This, in turn, can have positive effects on the mental wellbeing of the people living in that community by fostering job creation and economic stability. As local businesses thrive, employment opportunities increase, providing a sense of financial security and purpose.
In addition, the support for local businesses can translate into increased funding for community programs. As is the case at Scadding Court community centre in Alexandra Park, a small neighbourhood in a downtown Toronto, which has been helping local women and immigrant entrepreneurs thrive since 2018. Through their initiative called the Newcomer Entrepreneurship Hub, they offer workshops on how to launch a business.
The opportunity for CPAs to help affect positive change like this exists—although hurdles still remain. “The challenge that we have in Canada today is that access to financial advice is limited for people who don't necessarily have enough investable assets,” says Michael Banham, CPA and Vice-President of Client Experience at PMG Intelligence. “We know from our research that if you get financial advice, you're going to be better off. I think that’s part of the journey to making people more self-sufficient.”
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