CARP participated at the Mutual Fund Dealers Association (MFDA) of Canada’s Senior Summit event in October to give the perspective of older investors. Mark Gordon, President and CEO of MFDA, opened the summit with a great introductory address that explained the response of the industry to the concerns and challenges faced by older investors. As a result, CARP invited him to write to CARP members based on his opening remarks at the Senior Summit:

On October 16, 2013 the MFDA held its first National Seniors Summit to discuss important issues related to servicing senior clients. Why did we hold this Summit? Why focus on seniors’ issues?  What did we hope to achieve? I’d like to answer these questions.

As one of the fastest growing demographics seniors are a priority for regulators all over the world, including the MFDA.  As senior investors approach and enter this life stage their investment needs change.  New issues arise such as, what is the best way to invest the assets of a senior who is no longer in the accumulation phase; especially in the current era of low interest rates? What can be done to help protect those assets from the volatility of today’s markets? More importantly, what can be done to prepare seniors to deal with that market volatility?

Some seniors will encounter even more serious and challenging issues such as capacity issues, issues related to undue influence, or worse, financial abuse by third parties or family members.

But when we talk about these issues, we need to be careful not to paint all seniors with too broad of a brush. Not all seniors are likely to fall victim to financial abuse. There are a great number of seniors who are sophisticated and savvy investors. But the sad truth is seniors of all levels of sophistication can still fall victim to financial abuse, and when they do the consequences are amplified.

The consequences are amplified because seniors are often retirees who rely on their accumulated assets for income, and they may have less time to make up for the significant losses that they may suffer.

Furthermore, seniors are often seen as vulnerable and easy targets for fraudsters for a variety of reasons. Some of these reasons include:

• The loss of the “ability to doubt” as one ages.
• The fact that seniors may be open to promises of quick profits due to their anxiety over their lack of retirement savings.
• Seniors may be isolated socially and wanting for company.
• Seniors are more likely to avoid reporting possible misconduct or complaining about their advisor.
• Seniors may be affected by memory issues.

The baby boom generation which is now reaching retirement age has been called the largest and richest generation ever.  Seniors as a group have been very successful in accumulating and growing their assets over their working lifetimes. This raises new issues and challenges as this large generation begins to retire.

How can we best deal with these issues and challenges?  This is a very important question that we want to help answer.

I’ll begin by mentioning what the MFDA is doing to protect seniors.  In our Enforcement department we have revised case intake processes to allow staff to identify and flag complaints involving seniors. Those complaints are then prioritized and dealt with accordingly.

In Compliance, during Member compliance reviews, our sample selection targets high risk issues and concerns which includes age as one of the criteria.

Internally for MFDA Staff, we have conducted staff training regarding identifying and dealing with seniors’ issues.

But more needs to be done.  A complete solution should involve all three stakeholder groups: investors, industry, and regulators.

With this view in mind the MFDA is doing two things, both involving education. First, with respect to investors, we are taking further action together with other regulatory organizations to help educate investors. Second, with respect to Members, we have launched education initiatives such as the Seniors Summit to help both us at the MFDA, and our membership better understand, identify and deal with issues related to seniors.

With respect to investor education, I think we all would agree that increasing the level of financial knowledge among investors is an important goal.  Hopefully an educated investor is more likely to:

• Avoid becoming a victim of financial abuse.
• Ask the right questions.
• Understand the relationship between risk and reward.
• Have realistic expectations of market returns.
• Question the use of words and phrases like “guaranteed” or “high rates of return.”

So with these goals in mind, over the course of the next year, the MFDA will participate in investor education initiatives with other regulatory organizations and a specific focus will be placed on seniors and other vulnerable groups.

While investor education is important, Member education and regulator education are just as important.  We planned the Seniors Summit because there are challenges unique to seniors that both the regulator and the industry face together. The Seniors Summit is just the start of further educational initiatives and we will continue to provide education to our Membership involving seniors’ issues over the next year.

The Mutual Fund Dealers Association of Canada (“MFDA”) is the self-regulatory organization for Canadian mutual fund dealers, regulating the operations, standards of practice and business conduct of its 114 Members and their approximately 80,000 Approved Persons with a mandate to protect investors and the public interest.

Read about CARP’s participation at the MFDA’s Senior Summit.