CARP helps mutual fund dealers understand what the average older investor looks like

older investor

CARP at the Mutual Funds Dealers Association Senior Investor Summit

Susan Eng, VP of Advocacy at CARP, joined a panel at the Mutual Funds Dealers Association’s National Senior’s Summit this week to help their members better understand the perspectives, experiences, expectations, and unique needs of older investors. The panelists explored the realities of older investors, particularly their fear of outliving their savings and the various challenges that make them vulnerable to inappropriate financial advice.

Joining CARP on the panel were representatives from three securities commissions: Brenda Lea Brown from the BC Securities Commission, Eleanor Farrell from the Ontario Securities Commission, and Marissa Rignanesi from the Financial and consumer Services Commission of New Brunswick. They presented the various challenges older investors face and the general consensus was that although greater investor education and awareness is needed, the rules governing financial institutions and advisors need to change to ensure a fair playing field for older investors.

The key challenges faced by older investors that CARP and other panelists highlighted included:

  • Asymmetry of knowledge – There is an imbalance of knowledge between investors and advisors that can place investors at a disadvantage. Although this is not exclusive to older investors, older investors may be at a potentially greater disadvantage due to their shorter timeframe to recover if a large loss were to take place.
  • “Sticker Shock” – Many older investors face unexpected high-cost expenses, such as health care costs for home care, institutional care or drugs, which they did not prepare for. Such unexpected expenses can suddenly present new financial hardship.
  • Diminished executive function – As some people age, executive decision making can become a challenge, which may put them at a greater risk of financial fraud and abuse.
  • Expectation Gap – Older investors rely heavily on the recommendations of their financial advisors and believe that investors are obligated to act in the best interest of investors, when there is no legislated fiduciary duty.
  • Making savings last – Older investors are in the de-cumulation phase of their investing career so rather than advice to grow and accumulate wealth, they need advice on how to make that money last. One of the most common and biggest concerns is the fear of outliving their savings.

CARP emphasized that due to the nature of many of these challenges, investor education and awareness is not enough. Instead, older investors want and need:

  • Appropriate investments – Suitability of investments for older investors must take into consideration their particular needs – the need for liquidity keeping in mind not just the age of investors but also their need to make RRIF withdrawals or to pay for unexpected medical expenses. Internal compliance rules must not only ensure that such factors are considered in determining suitability but also be enforced.
  • Fiduciary duty – Many older investors already believe that their advisors have a duty to act in their best interest. Without a legislated best interest standard, investors who try to sue to recover their loses face an uphill battle.
  • Restitution – Most importantly, older investors just want their money back when things do go wrong. They need a clear path to restitution.

The  financial industry is recognizing the need to better serve their older investors. These industry-sponsored sessions to raise awareness within the profession constitute an important first step. CARP will continue to press for the structural changes that will better protect investors and help them get their money back when they are given inappropriate advice.

Links and resources for investors:

New Brunswick’s Financial and Consumer Services Commission’s Stop Financial Abuse Resource.

BC Securities Commission’s Investor Guides.

CARP’s call for better investor protection