Aging Canadians will be hit with unexpected events that threaten to disrupt their financial plans, such as health crises, and financial advisors need to do a better job of addressing this uncertainty, suggests new research from the Ontario Securities Commission (OSC).

The OSC released a report on Monday entitled The Financial Life Stages of Older Canadians detailing the results of research carried out by the Brondesbury Group in an online survey of more than 1,500 Canadians aged 50 and older. The report indicates that around 60% of respondents face unanticipated events that can disrupt their financial plans. The three biggest disrupters include financially supporting an adult relative who is having difficulties; paying significant health-care expenses; and losing money in the stock market and not recovering those losses.

For advisors, the report points out that the impact of health-related issues on people’s financial plans is not being recognized or served adequately: “Advice on coping with health and associated financial issues is the next frontier for top financial advisors and their firms.”

The OSC report stresses that older Canadians need advice that addresses health-related issues, both in terms of saving for retirement and in terms of managing retirement spending. The need for advice includes issues such as coping with declining health; adapting to health and activity limitations; funding home renovations and medical devices; and dealing with unexpected costs.

“Health issues have been underestimated as a source of potential financial disruption,” the OSC report says, noting that almost one-quarter of Canadians in the workforce are forced to retire due health issues — either their own or those of a family member. Furthermore, the report says two-thirds of households in which residents are aged 75 and over have major health problems they need to manage.

“Citing ‘long-term care’ or other insurance-based solutions misses the point that most people want to adapt their lifestyle, not to give it up entirely,” the OSC report notes.

This isn’t just an issue for older clients either, the report says: “At an earlier stage in life, the challenge for advisors is identifying potential life risks for clients and helping them prepare for the unexpected. The biggest risk prior to retirement is being forced to retire earlier than expected due to personal or family health problems, but that is certainly not the only unexpected risk that people face.”

Indeed, the OSC report also indicates that, “Advice on recovering from investment losses is also lacking. Because many older investors do not take action when they have lost money on investments, advisors need to more proactive in helping them with strategies to recover from their losses.”

In addition, the OSC report suggests that there is an opportunity to develop online tools to help people do a better job of planning for the unexpected: “Most obvious needs are tools to predict the impact of inflation and future health-care costs.”

As well, the report notes that there is also a need for tools to help Canadians understand how long they will actually need to fund retirement; with almost 40% underestimating that period. “The proportion of older Canadians who expect to outlive their money suggests that at least three out of eight people underestimate their likely lifespan and risk overspending too early.”

Separately, the OSC report finds that fraud is a major problem, as fraudsters have victimized approximately 6% of older Canadians. “The onus will fall on regulators to try to stop fraud,” the OSC report says. “This is increasingly difficult, with the Internet playing a major role in marketing investment scams.”

The report also calls on regulators and other policy-makers to avoid treating older investors as a homogeneous group. Instead, it suggests that they should be considered as three or four distinct groups for policy purposes.

“Seniors represent a growing segment of Ontario’s investors, and they are enjoying longer lives, need more money to finance a longer retirement and are faced with increasingly complex investment choices,” said Howard Wetston, chairman and CEO of the OSC. “As a result, we need to do proactive research to understand their investing needs and identify opportunities for regulatory action.”

The survey results are deemed to be accurate plus or minus 2.5%, 19 out of 20 times for the entire sample.