Special Feature

Advisors’ Report Card 2016

Canada's financial services sector is in the midst of adapting to significant changes, including the rise of robo-advisors and the growing regulatory complexities of working with an aging clientele. Thus, advisors surveyed for Investment Executive's 2016 Report Card series are thinking carefully about the support they need from their firms to meet these new realities.

As regulators increase their focus on elderly clients, financial services firms of all descriptions are working diligently to provide products, services and staff training suited to help advisors take care of the needs of their aging clients

By Jade Hemeon | September 2016

The rapidly expanding seniors demographic is increasingly important to the financial services sector, and firms are beefing up their efforts to help their financial advisors deal with the various issues that clients may experience as they age.

Brokerages, mutual fund and full-service dealers, banks and insurance agencies are working diligently to provide products, services and staff training suited to aging clients. And, for the most part, advisors who want help with the challenges of managing their aging client base appreciate these efforts, according to the results of this year's Report Card series.

As regulators increase their focus on senior clients, advisors surveyed for this year's Report Cards were asked for the first time in a supplementary question how well their firm is prepared to deal with the unique issues relating to this demographic on a scale of one (not at all) to five (completely). Overall, 76.3% of advisors gave their firms a rating of either four or five.

"We're totally prepared," says an advisor in Ontario with Mississauga, Ont.-based Edward Jones. "All our programs are designed for retirement and longevity and showing clients how long their money will last. We can do different scenarios with growth rates and inheritances. We can do just about any scenario necessary - such as how clients will pay for [long-term] care."

In contrast, only 16.3% of survey participants gave their firm a rating of three in the category, indicating they feel their firms are somewhat prepared, while just 7.5% gave their firms a rating of one or two, meaning those advisors view their firm as being unprepared to meet these challenges.

Adequate preparation for assisting aging clients ranges from helping seniors recognize and avoid financial abuse to producing materials such as account statements and educational pieces in large, readable print. Adjusting a financial plan to a senior client's requirements also is needed, as is having products suitable to seniors' investment needs, which include higher levels of principal protection and regular income.

"[The bank] has a lot of products geared for clients who need tax-efficient income," says an advisor in Ontario with Toronto-based Bank of Montreal.

Adds an advisor in British Columbia with Vancouver-based Canaccord Genuity Wealth Management (Canada): "We have a full suite of products designed to limit losses, so everything is here that you'd need."

This is an increasing focus for Canaccord, especially at a time when the firm is experiencing accelerating growth in the number of clients between the ages of 55 and 75, says Stuart Raftus, the firm's president.

"One of the key components in any client relationship is understanding investment goals and objectives of that client, and then building a financial plan or a portfolio driven around the suitability of the investments for that client," Raftus says. "As somebody gets older, generally speaking, the suitability of the investments starts to narrow a bit."

Providing investments that suit seniors' multiple needs is becoming a priority for all firms as more clients enter senior territory every year. In fact, Beamsville, Ont.-based Canadian Initiative for Elder Planning Studies Inc., which offers a course leading to the elder planning counsellor designation, cites Statistics Canada research that shows seniors aged 65 and older made up 16.1% of the population in July 2015. The 3.5% annual growth rate of this demographic is four times the average Canadian population growth rate of 0.9%. As such, the number of Canadian seniors is expected to double within 20 years.

In addition, seniors not only represent a higher percentage of most advisors' client base as the overall population ages, but seniors make up the largest share of assets under administration, says Richard Corner, vice president and chief policy advisor with the Investment Industry Regulatory Organization of Canada, who played a significant role in developing that self-regulatory organization's recent guidance on compliance and supervisory issues when dealing with senior clients.

"Dealers face a variety of challenges, from helping seniors to generate sufficient income in a low interest rate environment to dealing with diminished capacity and the things that might lead to, including financial exploitation by others," Corner says. "It's important that advisors know who to contact and under what circumstances if they have concerns about a client's well-being, and how and when to escalate an issue within the ranks of the firm."

For the most part, advisors surveyed for the Report Cards said their firm is stepping up its efforts in this matter.

"We had a conference in September [2015] and there were breakout sessions on dealing with seniors, recognizing loss of mental capacity and what to do about that," says an advisor in Ontario with Toronto-based ScotiaMcLeod Inc.

"We get constant training on what to do with older clients," adds an advisor in the same province with Winnipeg-based Investors Group Inc. "They constantly remind us of the vulnerability of seniors."

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