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Protecting Older Investors: A Joint Project of FAIR Canada and the CCEL

Canada is in the midst of a huge demographic shift. By 2024, people aged 65 and over will account for 20 percent of the country’s population. This has significant policy implications, from infrastructure needs to health care and community services.

People don’t often think about the investment industry as being impacted, but the reality is that financial services firms serve millions of senior investors. As older adults experience dementia or other conditions that affect their cognitive capacity, they can be at higher risk of undue influence or financial exploitation.

In this context, financial advisors may want to take protective action in cases where they believe a client has lost capacity or is subject to undue influence. But in Canada, there is currently no regulator-approved protocol to define what actions financial advisors can actually take.

To address this issue, the Canadian Foundation for Advancement of Investor Rights (FAIR Canada) and the Canadian Centre for Elder Law have launched a joint one-year project funded by the Law Foundation of Ontario Access to Justice Fund. This Project will consider the development of a conduct protocol and a practical mechanism for Canadian financial services firms and their investment representatives to take urgent, short-term protective action for the benefit of vulnerable consumers.

Marian Passmore, COO and Director of Policy at FAIR Canada, explains what this project is all about:

Why did you want to do this project?

Marian: Loss of capacity issues and financial elder abuse are concerns that will become more prevalent given the increasing number of people who will be older in our society. When people have declining abilities, that affects their capability to deal with their finances appropriately, and the financial services industry is one of the front lines where these issues may be detected.

For example, people subject to undue influence may be giving instructions for making riskier investments than they would normally do or convinced by unscrupulous “advisors” to make such investments, or they may engage in unusual transactions on their account which could be the result of someone they trust actually exerting undue influence.  We wanted to do this project so that vulnerable financial consumers can be better protected and to also help the financial services industry in detecting and addressing this issue.

This is an issue where all the stakeholders appear to have aligned goals of helping to protect their clients and making sure that those who come into contact with clients have the right training to address the issues properly so that client harm is minimized.

Why is this a problem now for the financial services industry in Canada?

Marian: Right now the financial services industry is caught between a rock and a hard place. If representatives are getting instructions from their clients that they think might be subject to undue influence or that the person is not capable of providing informed instructions, they may have to choose between breaching either their regulatory requirements (by not carrying out the client’s instructions) or privacy legislation (of not disclosing personal information to a third party) in order to try to help protect the client.

We want to make sure that the right protocols and education are put into place so that the financial services industry can address these issues in a way that does not breach their requirements and also protects the individuals involved to the extent possible.

What have you accomplished so far on this project?

Marian: We have done a lot of research on what other jurisdictions have done in order to inform what we think will work in the Canadian context. The United States is the furthest along in terms of legislative changes to address the issue, but they have different structures than we do so we have to look at the Canadian context and figure out what will work here. There likely needs to be a “Made in Canada” solution.

You are leading consultations across Canada: who do you want to hear from?

Marian: We are speaking to a very broad cross-section of stakeholders: community stakeholders, those who represent vulnerable investors, the financial services industry, regulators, staff from the Public Guardian and Trustee, and privacy experts.

We want to hear first-hand about people’s experiences and industry practices now in order to make sure that we know what the roadblocks are both from the consumers’ perspective and the financial industry’s perspective. We want to get people’s input on what they think the proposed solutions should be, whether they think the legislative framework chosen in the United Sates would assist in Canada or if any changes need to be made in the Canadian context. I would also like to hear from people about what technology is being used now to protect individuals and what role they think technology could play in the future.

What is next?

Marian: We are going to consult until mid-June and we hope through our webinar and in-person consultations in Toronto, Vancouver, and a national webinar to get a lot of feedback. People are encouraged to provide us with written comments that they may have by June 19, 2017. Our final report will be ready by the end of August.

Consultations held:

  • June 12 – CARP (Canadian Association of Retired Persons)
  • June 14 – Investor Advisory Panel of the Ontario Securities Commission
  • June 20, 2017 – A webinar hosted by Elder Abuse Ontario

By Laura Tamblyn Watts

 

For more information: visit the project page and download our consultation paper.

To participate in our consultations please contact:
Marian Passmore at 416-214-3441 (marian.passmore@faircanada.ca) or Laura Watts at 647-969-6793 (lw@elderconcepts.com).

June 05, 2017