Report finds choice architecture in forms can boost likelihood of clients appointing TCPs
Efforts to ensure seniors are protected through the appointment of trusted contact persons (TCPs) can be enhanced by using insights from behavioural finance, according to a new report from the Ontario Securities Commission (OSC).
In a report prepared in collaboration with BEworks, the OSC highlighted regulatory efforts to enhance protection of older and vulnerable clients, particularly through proposed amendments to NI 31-103.
“The Proposed Amendments do not prevent registrants from opening and maintaining an account if a client refuses or fails to identify a TCP, as long as the registrant takes reasonable steps to obtain the information,” the report noted.
To help registrants convey the importance and benefits of appointing a TCP to clients, the research examined the behavioural barriers that might impact an older investor’s ability to do so. It noted that clients’ ability to comprehend information about the role and significance of a TCP may be affected by the way they get that information, as well as their frame of mind.
The report also highlighted a tendency for older investors to be overly optimistic, causing them either “to underestimate the likelihood that they will experience financial exploitation or diminished mental capacity” or be “overconfident about their financial decision-making abilities.” Not knowing other older investors’ attitude towards appointing a TCP, it suggested, could also play a role.
Through a behavioural audit of several forms currently used to collect TCP information, researchers found “a lack of clarity about the conditions under which a TCP would be contacted and the types of information that would be shared with them,” as well as the possible consequences of inaction.
Based on those findings, the proponents conducted a randomized controlled trial of 908 older Canadian investors with an average age of 66 years old. Participants were randomly presented with one of four forms, each of which contained one or some combination of behavioural prompts and interventions including:
- Active choice – directly asking the participant if they want to appoint a TCP;
- Priming – asking them to recall either an instance when they made a poor financial decision (negative priming) or one where they made a smart financial decision (positive priming);
- Debiasing – providing relevant information (e.g., statistics on senior fraud in Canada) to correct biases toward excess confidence or optimism; and
- Social norm – citing IIROC finding that most Canadians support the idea of appointing a TCP
The researchers determined a form that incorporated debiasing, social norm, and active choice architecture led to the greatest increase in willingness to appoint a TCP. Compared to the control group (those who were faced only with an active choice), participants who were given that form showed a 23% increase in willingness to name a TCP.