There are a few undeniable facts that, when combined, will profoundly impact the Canadian population and the financial industry. Canada’s population is getting older. The proportion of the population aged 65 and older rose from 14.1 percent in 2010 to 19.0 percent in 2022 and is estimated to hit 22.5 percent in 2030.¹ Also, there is a clear link between aging and dementia or cognitive decline. The Canadian Institute for Health Information reports that the percentage of Canadians aged 65 to 69 with dementia is less than 1 percent; however, this figure more than doubles with every five-year increase in age, with one in four seniors over 85 diagnosed with dementia. As the proportion of our population in this age range continues to grow, so will the number of those with dementia.² Combined with the fact that Canadians are living longer, with an average life expectancy of over 81 years,³ an increasing number of Canadians are living with dementia over a longer period of their lives.⁴ One last fact to consider is that of elder abuse. An Ontario Human Rights Commission Report states that financial abuse, which includes fraud and the mishandling of an older person’s money or property, represents 62.5 percent of all elder abuse.⁵

Understanding these facts and the related consequences will become extremely important for all investment professionals tasked with helping clients make the best investment decisions.

What regulations or standards exist to protect individuals with dementia?

In 2021, the Canadian Securities Administrators (CSA) adopted several amendments to National Instrument 31-103 to enhance the protection of older and vulnerable clients.6 It is believed that financial professionals, through their interactions and history with their clients, are ideally situated to notice signs of cognitive decline or financial exploitation. The amendments include the introduction of a trusted contact person (TCP), whom advisors can contact if they have any concerns about potential financial exploitation or their client’s ability to make financial decisions. The amendments also allow for the temporary delay of a transfer or withdrawal from an investment account if the advisor holds such concerns.

Below are examples of warning signs created by the Ontario Securities Commission to help financial professionals assess when a client no longer has the mental capacity to make decisions surrounding financial matters:

• Memory loss, such as forgetting previously given instructions or repeating questions
• Increased difficulty completing forms or understanding disclosure documents
• Increased difficulty making decisions involving financial matters or understanding key aspects of investment accounts
• Confusion or unfamiliarity with previously understood financial terms and concepts
• Reduced ability to solve everyday math problems
• Exhibiting unfamiliarity with surroundings or social settings or missing appointments
• Difficulty communicating, or difficulty expressing their will, intent or wishes
• Increased passivity, anxiety, aggression or other changes in mood or personality, or an uncharacteristically unkempt appearance

Source: Ontario Securities Commission. Identifying and responding to signs of diminished mental capacity. Accessed September 28, 2023. https://www.osc.ca/sites/default/files/2022-05/White-Label-Materials-3-Identifying-and-responding-to-signs-of-diminished-mental-capacity.docx

What Is CFA Institute doing to protect these individuals?

CFA Institute has proposed a revision to its Code of Conduct.⁷ The modification would allow members to disclose confidential information to third parties when they believe a client’s ability to make informed decisions is diminished, and the disclosure would protect the client’s interests. This represents a departure from the standard’s current absolute requirement to maintain client confidentiality. The proposed change is expected to become effective as of January 1, 2024.

Revised confidentiality standard with changes and additions:

III. DUTIES TO CLIENTS

A…

E. Preservation of Confidentiality

Members and Candidates must keep information about current, former, and prospective clients confidential unless:

The information concerns illegal activities on the part of the client or prospective client,

Disclosure if required by law, or

The client or prospective client permits disclosure of the information. or

Disclosure protects the interest of the clients who demonstrate diminished mental or cognitive capacity that prevents making informed decisions.

Members should address the potential of diminished capacity with their clients at the beginning of the relationship when they are at full mental capacity. During those conversations, a contact person should be designated, and parameters and procedures to follow should be established.

Note that the proposed standard does not compel members to proactively bypass their duty of confidentiality or continuously assess and report on their clients’ cognitive abilities; there will be no violation of the standard if a member decides not to break the confidentiality of their clients in situations of cognitive loss. Additionally, if applicable laws require a member to maintain strict confidentiality in all cases, then the member must abide by those laws, even if the Code and Standards permit this exception.

Canada’s population is getting older and living longer, which should matter to investment professionals as this increases the probability of having clients who experience dementia or financial abuse. These professionals are uniquely positioned to identify signs of such vulnerabilities and safeguard their clients and their financial investments. The new regulations and standards provide additional tools to achieve this goal. 

³ Statistics Canada. “Deaths, 2021.” The Daily. The Government of Canada, August 28, 2023. https://www150.statcan.gc.ca/n1/daily-quotidien/230828/dq230828b-eng.htm

⁴ Keep in mind that, while this article focuses on the link between age and dementia, dementia can impact individuals at any age.

⁵ Ontario Human Rights Commission. Time for Action: Advancing Human Rights for Older Ontarians. June 2021. https://www.ohrc.on.ca/en/time-action-advancing-human-rights-older-ontarians/

⁶ Canadian Securities Administrators. CSA Notice of Amendments to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations and to Companion Policy 31-103CP Registration Requirements, Exemptions and Ongoing Registrant Obligations to Enhance Protection of Older and Vulnerable Clients. July 15, 2021. https://www.osc.ca/sites/default/files/2021-07/ni_20210715_31-103_ongoing-registrant-obligations.pdf

⁷ CFA Institute. “Revisions to the Code of Ethics and Standards of Professional Conduct.” Ethics Education, May 4, 2022. https://www.cfainstitute.org/en/ethics-standards/education/consultation-paper-code-ethics-standards-professional-conduct