Accreditation of senior investors and consumers through financial literacy testing

Abstract

In the US and UK, a lot of attention is paid to protecting the rights of older investors and consumers of financial services. In particular, a part of brokers, investment advisers are being tested in the US for understanding of the specifics of working with older investors. However, older investors themselves are only tested for scientific purposes, and the results of such tests have no regulatory implications. In some jurisdictions the brokers rejected the proposals of the regulators to include testing elements into the qualifications of investors. In Russia in 2021 the tests were introduced for non-qualified investors for access to the acquisition of medium-risk assets and margin loans, but without the separate test for elderly investor. We believe that older 63+ investors, given the high probability of dementia development, should be tested for financial literacy by independent from brokers universities annually. Testing should be separate for traditional products and cryptoassets respectively. Depending on the result of the test and the personal desire of the elderly investor, such dynamic restrictions may be introduced as the bans on purchasing certain products, margin loans, purchasing financial products remotely, also mandatory video recording of purchasing a product in the office, as well as a ‘second hand’, that is, confirmation all or major transactions by a family member. Testing will protect not older investors only but also the brokers, investment advisers from being accused of selling nonsuitable products to these clients.