Law Times

Law Times • February 26, 2018 Page 9 www.lawtimesnews.com Need to change the status quo Elder financial abuse a pressing issue BY MICHAEL MCKIERNAN For Law Times T he investment indus- try must act now to get ahead of the growing problem of elder finan- cial abuse, according to one of the authors of a major new study on the subject. Laura Watts, senior fellow and staff lawyer at the Canadian Centre for Elder Law, co-wrote the recently released "Report on Vulnerable Investors," which chronicles the rise of elder abuse, financial exploitation, undue in- f luence and diminished mental capacity in Canada, as well as the ill-preparedness of invest- ment firms to deal with them. Watts says time is of the es- sence to change the status quo, because of the huge intergenera- tional transfer of wealth already underway as the baby boomer generation transitions to retire- ment. "The situation is bad now, but it will get much worse if nothing is done about it quickly," she says. "Billions of dollars are go- ing to change hands in the next five or 10 years, so we must take advantage of the opportunity to move right now on these issues, to help everyone do the right thing." Kimberly Whaley, principal at Whaley Estate Litigation in Toronto, says financial advi- sors are often "caught between a rock and a hard place" when they suspect a person is strug- gling cognitively or being taken advantage of. "On the one hand, they may well be the first entity or person to become live to the possibility that all is not well with a client," Whaley says. "But on the other hand, it's difficult for them to know how to act, because they have cer- tain duties toward investors, and there are no guidelines or man- datory reporting rules. "The need to protect a per- son's autonomy bumps up against the need to protect a vul- nerable individual, and it's going to happen increasingly with our aging demographics," she adds. However, Watts says the na- ture of their relationships with investors also means advisors are uniquely well placed to de- tect and prevent financial abuse. To ensure that investments match risk profiles, advisors are required to conduct "know- your-client" interviews, a pro- cess that often includes an an- nual consultation in person or over the phone. "It's not like walking into a bank, where you might see a dif- ferent person every time," Watts explains. "These tend to be long-term situations, almost like a fam- ily doctor. Advisors get to know you and see changes over time." In addition, Watts says that while sufferers with good cop- ing skills can often cover up the first signs of dementia or cogni- tive impairment, that's not so easily done in discussions over finances, because they involve executive function. "Financial management is usually one of the first things to go, and the inability to under- stand higher-level mathematical calculations is a big neurological red f lag," she says. Together with her report co- author Marion Passmore, direc- tor of policy at the Foundation for the Advancement of Investor Rights, Watts has come up with a set of six recommendations designed to help advisors in the investment industry transform its role in abuse prevention. Trusted contact person: The report says securities regula- tors should require firms to ask clients for the name of a trusted contact at the time they open their account, to be confirmed or updated annually. Temporary holds: Qualified individuals within firms should be authorized to place a tempo- rary hold on trades or disburse- ments of assets belonging to a vulnerable client, if there is rea- son to believe that the investor has lost capacity or that financial exploitation is occurring. Legal safe harbour: Firms that disclose clients' private in- formation as part of a report to government agencies, law en- forcement or a trusted contact person should be protected from legal or regulatory liability, as long as the disclosure was made in good faith, the authors say. Conduct protocol: Passmore and Watts urge securities regu- lators to publish a conduct pro- tocol setting out the steps firms and representatives should take to identify and protect vulnera- ble clients, which firms can then use as the foundation of their own policies and procedures. Education and training: Firms should be required to train staff in the areas of elder abuse, undue inf luence, mental capacity issues, enduring powers of attorney and ageism, says the report. Securities regulators should provide a gatekeeper role in terms of content and ensuring that minimum proficiencies are met, the authors add. Outside resources and re- sponders: Firms must learn how and when to refer a case of suspected elder financial abuse, undue inf luence or diminished mental capacity, as well as who to make their concerns known to. Without a centralized re- porting centre in Canada, the local responders will differ from province to province, Watts and Passmore note. "We call on secu- rities regulators and the invest- ment industry to really engage on these issues," Passmore says. Watts says the willingness of investors to act as gatekeepers is only part of the solution and that proper training is essential to make sure it's done right. "If you go in with limited knowledge, you can make the situation worse, by accidentally notifying an abuser, for exam- ple," she says, adding that the re- sponse from the investment in- dustry has been overwhelmingly positive to the report. According to Whaley, it's not just financial advisors who could benefit from additional training on spotting the signs of elder abuse. "We all could. When I went to law school, we didn't learn about the red f lags for undue inf luence or capacity problems," she says. "These are inherently com- plex issues that almost every ju- risdiction in the world is strug- gling with. "We need to get the informa- tion out there, have everyone trained to be alert and, hope- fully, find a model that works," Whaley adds. Charles Wagner, an estate litigator and partner at Toronto firm Wagner Sidlofsky LLP, says he welcomes anything that could improve early detection of elder abuse. "I have a skewed view, be- cause I deal with it when the situation explodes and the prob- lems become clear, which cer- tainly seems to be happening more often," he says. "If someone suspects that an elderly person is being taken ad- vantage of, I tell them to call the police, but they won't always get involved. "Another option is the Pub- lic Guardian and Trustee or the Advocacy Centre for the Elderly, but truth be told, nothing can replace a competent lawyer who will seek a full accounting and the reversal of any illegitimate gifts," Wagner adds. LT FOCUS Laura Watts says the issue of elder financial abuse will worsen 'if nothing is done about it quickly.' Legal News at Your Fingertips Sign up for the Canadian Legal Newswire today for free and enjoy great content from the publishers of Canadian Lawyer, Law Times, Canadian Lawyer InHouse and Lexpert. Visit www.canadianlawyermag.com/newswire-subscribe THE LATEST NEWS THE BEST COMMENTARY DELIVERED WEEKLY FOR READING ON ANY DEVICE AnyWhere AnyTime AnyDevice DM Tools Cloud for child and spousal support calculations. Pay Per Use and Annual Subscription options available. www.divorcemate.com 1.800.653.0925 Ext. 407 • sales@divorcemate.com Straightforward, easy-to-understand printout. Instant, secure access to all of your client files at home, at work, at court. DivorceMate-1/4_LT_Feb26_18.indd 1 2018-02-20 4:42 PM

• Cover