IOSCO C8 Report on Senior Investor Vulnerability
IOSCO Committee 8 was commissioned by the IOSCO board to produce a report on Senior Investor Vulnerability, which looks at the potential issues faced by senior investors around the world and how these can affect their interactions with financial services. It also discusses and highlights examples of best practice being adopted in different jurisdictions worldwide. The report is not designed to introduce hard policy changes, but instead to raise awareness of the issues faced by people over 65, to encourage debate, to share best practice, and to act as a foundation for developing toolkits and work-streams for different regulators to use. The FCA, together with FINRA, have managed this project.
The report signposts recent work by several jurisdictions. Emerging economies have indicated that this project will prove particularly helpful in developing strategies to mitigate risks for senior investors. An important element of this project is collaborative working with a number of industry bodies who are members of the Affiliate Members Consultative Committee (AMCC), which includes the Financial Planning Standards Board (FPSB).
The context, perspectives, and practices discussed throughout the report derive in substantial part from a quantitative and qualitative survey of C8 members as well as a second survey to IOSCO Committee 3 on Regulation of Market Intermediaries (C3) and the AMCC. Results of these surveys suggest that nearly all respondents believe that senior investors are at greater risk than other investors of losing money to fraud or being taken advantage of by others.
Due to the nature of IOSCO, this report has been prepared with input from countries around the world. Some of the key definitions and terms used in the report can vary between countries; as can the impact of different techniques and solutions. The examples of best practice are drawn out to allow organisations to exchange ideas and develop new strategies which are appropriate for their country, giving organisations the ability to flex and adapt their approach to suit different demographics and populations.
The C8 Senior Investor Vulnerability working group plans to communicate the findings, develop toolkits for regulators and to share identified best practice with industry. The working group will conduct an analysis of the impact of this report after one year to determine if any of the jurisdictions has changed or is planning to change their approach to protecting seniors from inappropriate and fraudulent investments. Developments in this area will be shared via the IOSCO network.
Key findings from the survey (see section 3, page 13)
Among members of C8, seventy-three percent of respondents to the survey report having programs in place to protect seniors. However, it is widely believed that senior investors are covered under existing strategies and that separate strategies to protect seniors are not necessarily needed.
Of the programs reported, educational outreach programs targeted at senior investors are the most common. Other efforts cited include research projects aimed at learning more about issues facing seniors, and regulators having employees or departments that specialize in or focus on senior issues. A little over half of C8 members surveyed believe that financial service providers and intermediaries have specific rules or guidance for dealing with seniors.
From the companion survey sent to C3 and AMCC, respondents largely expressed that senior investors typically face the same risks as most other investors, and most issues pertaining to seniors could also be shared by investors from other demographics, including matters of suitability and client due diligence. Some respondents also pointed to the move toward online communication and digital disclosure as an additional area of risk for senior investors, particularly for those that may be less technologically proficient or unaccustomed to receiving information in a digital format.
Sound practices for regulators (see section 5, page 24)
The report summarises the ideas for best practice by breaking this down into four key headings:
- Deliver educational programs and resources targeting senior investors;
- Foster the development of senior-focused expertise within existing regulatory, educational or advisory programs;
- Conduct research projects aimed at better understating the risks and issues facing senior investors and to better understand the incidence and mechanics of investment fraud impacting seniors in their jurisdictions; and
- Develop guidelines for, and provide training to, personnel reviewing transactions conducted with senior investors.
Sound practices for Financial Services Providers
Additionally, the report shares two ideas of best practice for financial services providers:
- Support for senior investors experiencing a life event during the product lifecycle; and
- Training and support for employees of financial services firms.
Read the full report.