A couple of years ago, a study was carried out by an organization with the wonderful acronym, NICE. The work by the National Initiative for the Care of the Elderly was the largest study of its kind into the abuse of seniors.
The report was published during an historic period – for the first time there were now more people aged 65 years and older in this country than children 15 years and younger. And the pace of change is not slowing down. By 2031, roughly one in every four Canadians will be a senior.
As our country gets older, it is going to put greater demands on a number of services including health, housing and support care for the elderly. One of the abuses highlighted in the NICE report was financial.
The Retirement Myth
For many seniors, retirement age does not always mean financial security. A recent study from Sun Life Financial found the average debt of seniors has doubled in the last 25 years, and 20 per cent of those surveyed still have a mortgage. And you may have noticed, there is a growing number of people reaching retirement age either still working or seeking to return to the workplace.
We also know over the next decade, there will be a growing number of Canadians who will be economically secure enough to retire. But some of them will be vulnerable to financial abuse; and the statistics suggest the perpetrator is most likely to be a family member. The study by the National Initiative for the Care of the Elderly found the prevalence of financial abuse affected 244,176 older Canadians.
Can this number be reduced if the people advising elderly investors have more awareness about the problem?
Time to Take Action
Last month the Ontario Securities Commission launched a strategy for seniors that involves financial advisors having an important role as first responders when it comes to financial abuse.
The commission highlighted the unique relationship most financial advisors have with their older investors, and laid out a set of initiatives it wants to see implemented. They aim to tackle a number of issues surrounding financial exploitation and cognitive impairment through education. Additionally, older investors can have their concerns and questions answered from dedicated staff in the OSC’s Inquiries and Contact Centre.
The commission’s strategy recognises more and more Canadians are going to be reaching retirement age and could be at risk of financial abuse unless steps are taken soon. For some time, the Investment Industry Regulatory Organization of Canada (IIROC) has been a strong voice urging action on an issue that is starting to garner more attention.
Piecemeal means problems
The OSC strategy also comes at a time when the federal government has hinted at developing a National Seniors’ Strategy. Surely there has never been a better time for a federal-led approach that improves the lives of seniors and includes comprehensive protection against financial abuse?
No one disputes that change will take time. It is easy for a financial advisor to tick the know your client (KYC) box; it is another to have the necessary skills to recognize when a power of attorney is necessary or when there are clear signs of financial mismanagement.
At present, each province and territory regulates financial advisors independently, but as Dolden and Newnham noted: “there is surprisingly little statutory regulation of the financial advisor industry”.
Given the growing, and unavoidable, demographic trend taking place in this country there has never been a more appropriate time to consider duty of care legislation for financial advisors and other organizations that have direct contact with elderly investors.
In the United States, federal lawmakers appear committed to passing legislation aimed at preventing the financial abuse of seniors.
No Simple Solution to Complex Problem
It is worth remembering, most of those involved in financially exploiting the elderly are family members. This is a highly sensitive issue that will have a number of pitfalls. It is important to take a cautious approach but with so many Canadians moving into the retirement phase of their lives we cannot allow caution to prevent action.
According to the OSC, the financial issues being faced by older Canadians have never been more complex. We know that thousands of elderly investors are at risk every year. Therefore, there has never been a better time to support a transformative alignment within the industry.
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