OSC engages BEworks to help advisors collect trusted contact information

Behavioural science is an important policy tool for regulators, say authors of the newly released OSC Staff Notice 11-790, Protecting Aging Investors through Behavioural Insights. The staff notice and report, developed in collaboration with consulting firm BEworks, was created to help those reading it to understand the psychological, emotional and social factors that may influence an older investors’ decisions, and identify ways of increasing the likelihood that they will appoint a Trusted Contact Person (TCP) when asked.

To address financial exploitation and diminished mental capacity issues in older and vulnerable investors, the Ontario Securities Commission (OSC) and the Canadian Securities Administrators (CSA) have proposed rules that would require registrants to take steps to obtain the name and contact information of a TCP for their clients who could be a resource when responding to possible circumstances of financial exploitation or concerns about declining mental capacity.

“Some registrants have already begun requesting their clients appoint a Trusted Contact Person as an industry best practice even in the absence of a regulatory requirement,” the report’s authors write.

The research undertaken to help this effort found that even small changes to the design of a form used to collect TCP information, for instance, can have a significant impact on the outcome.

The most effective form tested by researchers contained three elements from behavioural science: It first incorporated a de-biasing statement about the prevalence of fraud and it included a sentence indicating that most people support the concept of a TCP, capitalizing on the tendency for individuals to make unfamiliar decisions based on what other people are doing. Finally, the form required users to make an active choice to appoint or not appoint a TCP. Overall, the behavioural science-informed changes to the form increased the likelihood that an older client would appoint a TCP by 23 per cent.

The report also examines the barriers to appointing a TCP and key biases that can affect an investor’s willingness to appoint a TCP.

“We encourage registrants to review the findings of the report and consider testing the use of these approaches when designing their own policies and procedures,” the staff notice concludes. “If proven effective, we encourage them to integrate these tactics into their current practices.”