RE: Serving senior clients is becoming a more risky endeavor, by Ellen Bessner, Partner, Babin, Bessner Spry LLP, investmentexecutive.com, August 24, 2015.
Bessner’s article makes a strong case for the fiduciary standard. By following such a standard, the number of invalid client complaints will fall and courts and regulators will make it clear that frivolous complaints will not prevail.
Of course, the real risk for seniors is poor investment-risk profiling, advisors with conflicts of interest, demanding sales quotas imposed on advisors and the lack of a “best interests” advice process. This is coupled with too many advisors who lack proficiency in managing the de-accumulation phase of investment portfolios, such as registered retirement income funds.
If one examines the enforcement reports of regulators, research studies on the vulnerability of seniors and statistics gathered by the Ombudsman for Banking Services and Investments, there is zero evidence of elderly clients exploiting the system. In fact, the opposite is true: as a group, seniors are exploited disproportionately by those who give financial advice. This result applies not just in Canada but also in the U.S., U.K., and Australia.
Blaming victims is not a proper response to unsuitable recommendations to seniors. But, as the Bessner article describes, it is used as a defence against claims made by clients who are seniors. In responses to complaints by the elderly, the infirm and the vulnerable, the complainants are said to be greedy, lacking in integrity, unwilling to accept responsibility for losses and feigning investment illiteracy. The introduction of a best interests duty would eliminate the allegations levied against seniors by making frivolous complaints untenable.
Ken Kivenko
Chairman, Advisory Committee
Small Investor Protection Association