With Canada’s aging population, preventing fraud and financial abuse of seniors remains a priority for the financial sector. We need to be particularly vigilant financial managers for vulnerable clienteles, for the good of seniors, their loved ones, our industry, and society. How can financial institutions and regulatory bodies help protect seniors?
Keeping seniors in control
Providing seniors with financial freedom and control is just as important as ever. Yet all of us at one time or another have received unusual requests from older clients or their family members. Not only can it be hard to detect fraud or financial abuse involving vulnerable individuals, it can also be a delicate situation to manage.
On the one hand, it is important to keep seniors in charge of their finances. While some may need assistance, this does not necessarily mean that they cannot be part of the decision-making process. On the other hand, we must do whatever we can to protect seniors from financial loss in the event of abuse. Seniors often have a shorter investment horizon to recoup any losses and generally a more conservative investment profile.
Advisors have the duty to provide all the information seniors need to make the right financial decisions. They must also listen and respond to seniors’ concerns. Their clients will appreciate the peace of mind this creates and will reward advisors with their trust.
Work with family and friends
Communicating openly with clients and their loved ones, with their consent, about the issues and potential risks associated with aging and discussing a plan to protect against fraud and financial abuse can help prevent awkward situations and family conflict.
In addition to a power of attorney or mandate in case of incapacity, why not consider strongly recommending a written authorization allowing the advisor to communicate with a trusted third party to manage more complex situations? This would further protect our clients, even those who do not wish to delegate decision-making authority to others.
There are several benefits to doing so. Not only can it strengthen the advisor’s relationship with the client, it can also foster strong ties of trust with key people in the client’s life.
Ideas for doing even more
Our clients’ best interests must remain a priority for us all. As such, there are now mechanisms in place for advisors and institutions to refuse to carry out instructions and to report potential abuse, even if the client is transferred to another institution.
That said, information sharing between institutions could be improved while staying within regulatory guidelines. This is where we could do more. Uncovering abuse is not enough—we must also report it properly. We can also ask regulatory authorities and legislators to allow institutions to share more information in the event of financial abuse. This would help better protect our seniors.
Regulatory authorities do a good job of disciplining regulatory offenders, but what about those who commit financial abuse? A number of provincial regulatory authorities, including the Canadian Securities Administrators, and self-regulators, such as the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA), have made proposals, but these changes must also provide safe harbour for advisors acting in the best interests of their clients. Other legislation outside of Canada should be examined, such as the Senior Safe Act in the United States.
Raise public awareness
We all agree that elder abuse still happens far too often. The financial sector must do more to educate the public, and this responsibility is not ours alone. Better-informed clients are more autonomous and better able to detect fraud and financial abuse themselves. This is key, given that these crimes are often perpetrated by immediate family members or caregivers.
We must continue to encourage open dialogue to detect fraud and abuse of seniors and vulnerable individuals. As advisors, we have to stay vigilant, build trust with our clients and their loved ones, and take every precaution to prevent potential crime.