Conversations about Finances as We Age

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November 28, 2018 – Canadian seniors are increasingly called upon to make complex financial decisions, with higher stakes, later in life than ever before. For many Canadians, aging may be accompanied by health, mobility, or cognitive changes that may affect their ability to make these judgments later in life, as well as their susceptibility to financial exploitation and fraud.

The Ontario Securities CommissionOntario Securities Commission An independent Crown corporation that is responsible for regulating the capital markets in Ontario. Its mandate is to provide protection to investors from unfair, improper or fraudulent practices, to foster fair and efficient capital markets and confidence in capital markets, and to contribute to the stability of the financial system and the reduction of systemic…+ read full definition (OSCOSC See Ontario Securities Commission.+ read full definition)’s Seniors Strategy, published in March 2018, includes a toolkit of policy, education and outreach, and other initiatives aimed at fostering conversations between older Ontarians and trusted family members, friends, and financial representatives to plan ahead to address risks that may come with aging.

To learn more about the conversations individuals are currently having on this topic, the OSC Investor Office commissioned a survey of over 2,000 Canadians covering conversations about aging and finances, among other topics.

Responsibility for handling parents’ financial affairs as they age

Our survey found that adult children are likely to play an increasing role in handling their parents’ financial affairs as their parents age, particularly after their parents reach age 85. As reflected in the chart below, while only 8 per cent of adult children manage the financial affairs of parents aged 45-54, 42 per cent of those with parents aged 85 or over report handling these parents’ financial affairs.

 

How well are families preparing?

In addition to tracking how responsibility for aging parents’ financial affairs shifts over time, we looked at how families are preparing for the potential that this transition will occur, from the perspectives of parents and their adult children.

What adult children say:

Generally, those with higher incomes and who work with a financial representative or portfolio managerPortfolio manager An investment professional who manages your investment portfolio. For example, they buy, sell and monitor investments that fit their clients’ goals and tolerance for risk.+ read full definition were more likely to have had conversations with their parents about finances (including how they would like their finances handled if they were no longer able to do so), and more likely to say that their parents had signed a power of attorneyPower of attorney A written authorization for another person to make financial and health care decisions for you if you are not able. Rules vary from province to province.+ read full definition. However, there were no substantial gender gaps with respect to any of the findings listed above.

What parents say:

Men and those with higher incomes were less likely to be worried about their ability to handle their personal finances in the future. Those who had talked to someone about how they would want their finances handled were most likely to talk to their spouse or partner (42 per cent), followed by one or more of their children (23 per cent) and their financial representative or portfolioPortfolio All the different investments that an individual or organization holds. May include stocks, bonds and mutual funds.+ read full definition manager (19 per cent).

Why hasn’t the conversation happened?

Discomfort talking about finances and parents’ confidence that they can manage their finances on their own are common reasons both adult children and parents give for not having a conversation about parents’ financial affairs. Many adult children who have not had a conversation take the view that it’s up to their parents to start the conversation.

Conversations about aging and finances are an important step in planning ahead, and the OSC encourages these conversations. As part of its Seniors Strategy, the OSC aims to provide practical guidance, resources and tools for registered firms and their representatives, older investors and their families and friends, to help facilitate these conversations.

About the Survey: The OSC Investor Office engaged Innovative Research Group Inc. (Innovative) to conduct a survey to, among other things, better understand the conversations Canadians are having about aging and their finances. The survey was conducted online among a representative sample of 2,259 Canadians, 18 years of age or older, between October 11 and 22, 2018. The sample has been weighted down to n=2,000 by age, gender and region using the latest Statistics Canada census data to reflect the actual demographic composition of the adult population 18 years of age or older residing in Canada. Since the online survey was not a random probability-based sample, a marginMargin A way to buy investments by borrowing money from a stockbroker. You must also invest some of your own money first. The extra that you borrow is your margin. Some rules apply about the size of margin that you can have.+ read full definition of error cannot be calculated. The Marketing Research and Intelligence Association prohibits statements about margins of sampling error or population estimates with regard to most online panels.

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