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Protecting older clients a critical task for advisors (July 19, 2018)

The aging of Canada’s population raises challenging legal, regulatory and ethical questions

Guest column for Investment Executive

By: Paul Bourque, President and CEO, The Investment Funds Institute of Canada

Canadians aged 65 and older constitute one of the fastest growing populations in the country. In fact, the proportion of people older than 65 is expected to rise sharply in the next 20 years to approximately 25% of the total population from approximately 17% in 2017, according to Statistics Canada. This expanding demographic has also amassed significant wealth. Protecting the financial well-being of these older investors is a critical issue for the financial services sector and for regulators — and one that demands action.

The Investment Funds Institute of Canada (IFIC) has been advocating for two specific actions that will help protect both investors and the financial advisors who serve them for several years: The first is the development of “safe harbour” legislation that provides the ability for advisors to hold funds or take other steps to protect their clients when they’re concerned about a client’s capacity or suspect financial exploitation. Without this regulatory safe harbour, advisors risk legal and civil penalties for not following through on instructions when they have concerns that complying with the instructions is not in a client’s best interests.

The second action IFIC has been advocating is to require that advisors make efforts to obtain the name of a “trusted contact” from their clients — someone an advisor has consent to speak with if that advisor develops serious concerns about diminished capacity or financial exploitation. Asking a client to name a trusted contact provides the consent that an advisor requires under privacy laws to look into concerning circumstances.

Sometimes, advisors are put in extremely difficult situations. They want to do the right thing for their clients, but they may not feel equipped to respond or know how to navigate through these situations properly. And given the growing number of seniors, these difficult situations are likely to increase.

The good news is that many organizations, including regulators, investor advocates and firms are developing consistent approaches to working with aging investors, including providing more clarity and guidance about the steps advisors can take to safeguard their aging clients’ financial security.

When the Ontario Securities Commission released its Seniors Strategy this past March, IFIC voiced the industry’s support, highlighting, in particular, plans to develop a framework that includes the naming of a trusted contact person and a safe harbour provision.

Other members of the Canadian Securities Administrators also are well advanced on actions to address the needs of vulnerable investors and to provide important guidance to advisors and their firms. In addition, the investment industry’s self-regulatory organizations (SROs) — the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association —also have recently highlighted their planned efforts in this key area.

Until these regulatory solutions are in place, it’s important to raise awareness of these issues. IFIC has a task force that brings together representatives from industry, investor advocates and regulatory organizations to advance the industry’s ability to respond to the needs of vulnerable investors proactively and effectively.

In early July, IFIC launched its online Vulnerable Investors Resource Centre, which features a three-part advisor training video series, produced in collaboration with CARP, along with other practical tools. These resources are intended to complement materials from regulators, SROs and firm-specific policies and procedures to support advisors in their front-line role of fostering and protecting the financial well-being of their aging clients.

The issue of aging investors raises challenging legal, regulatory and ethical questions and affects all financial services stakeholders. IFIC is very encouraged by the recent regulatory action to protect this large and growing segment of our population. We are confident that these initiatives represent a tipping point and that this positive momentum will continue.