As the Canadian population ages, more advisors will be working with vulnerable clients, according to an expert panel speaking at the Association of Canadian Compliance Professionals (ACCP) Compliance Forum on Monday, which means advisors and firms need to take steps to protect these clients and their own practices.

A vulnerable client, said Elsa Renzella, director, enforcement litigation, Investment Industry Regulatory Organization of Canada (IIROC) and a panelist at the Toronto event, is an individual who is easily influenced, has limited investment knowledge or is unable to make independent decisions.

While the rules are not hard and fast as to who is vulnerable or not, said Shaun Devlin, vice-president, enforcement, Mutual Fund Dealers Association of Canada (MFDA), about third of cases before the MFDA involve seniors. Many seniors qualify as vulnerable because of a loss of cognitive ability, their ability to doubt or to question, their isolation and willingness to trust others.

Ellen Bessner, a partner with Cassels Brock & Blackwell LLP, outlined the following four steps for how firms can make sure that their advisors working with senior clients remain complaint with the regulators:

> Have a paper trail
While regulators may not “paint all seniors with the same brush,” said Bessner, they are likely to give clients over the ago of 60 the benefit of the doubt in an investigation if there is no paper trail.

“The impression is that seniors never lie and they’re always going to tell the truth,” she said, “and that’s the view taken because they are perceived as vulnerable.”

Furthermore, the children of a client can sue the advisor after the parent has passed away if they feel there was some wrongdoing related to the parent’s account, she said, and without proper documentation there will be no evidence to show that the advisor adequately communicated consequences and risk to the client.

As such, Bessner said it’s important to maintain proper records of any letters or other forms of communication with client.

> Communicate directly
When working with a senior or vulnerable client, all communication needs to be two-way.

While advisors may think they are staying in constant contact with clients by sending out communication materials such as a monthly newsletter, said Bessner, that is not enough when working with the elderly.

Printed communications may be sent to an alternate location, she said, particularly if the client lives in a retirement home. As well, if the advisor sends out an electronic newsletter it’s not as likely that a senior will read it.

As such, advisors need to make sure they talk to their senior clients over the phone or in person on a regular basis, she said.

> Use disclaimers
Sometimes when advisors put together a presentation for clients on how their investments and savings will fund their retirement, clients misinterpret it as a full financial plan that is guaranteed, according to Bessner.

As such, advisors need to be clear in the language used in such presentations, she said, to make sure that clients understand that it is only a presentation based on assumptions and that it is not guaranteed.

> Explain fees
Transparency in regards to commissions, fees and the concepts of gains and losses in an account, said Bessner, is very important when working with senior clients.

“[Advisors] have to actually own up to it,” she said. “Yes, they may lose the client, they may disappoint the client but they will not be faced with a lawsuit if they’re transparent and warn them of the consequences.”