By iA Private Wealth, April 25, 2022
Finding an Investment Advisor who provides unbiased, professional advice is foundational to a successful relationship. Securities regulators recognize this important aspect of the investor experience and continue to enhance regulations that focus on building trust.
Conflicts of interest
Reforms implemented last year require registered dealers and the advisors who work for them to inform their clients of any conflicts of interest that may arise. The CFRs place the onus on dealers and advisors to explain in clear and straightforward language what these conflicts of interest might be and how they will address them in the best interests of their clients.
An example of a potential conflict of interest would be if an advisor is in a position to earn higher compensation for selling a certain type of product, or where the dealer might stand to receive a greater benefit, such as “proprietary” mutual funds managed and operated by the firm.
Suitability of investments
Advisors continue to be responsible for determining if an investment is suitable for a given client, and the CFRs help them accomplish this important task. The advisor can gain greater insights into each client through an enhanced Know Your Client (KYC) document. An advisor uses the KYC to gather an expanded range of information about a client’s financial situation, risk tolerance, time horizon and investment objectives, while making a reasonable effort to keep the KYC updated in a timely manner as a client’s circumstances change.
Upon opening a client account, dealers and advisors must deliver enhanced information to give clients a sound understanding of their overall offering. This information includes disclosing which products and services might be available (or unavailable) to the client, how advisors are compensated, what types of costs the client may incur through their ongoing relationship, and what specific responsibilities the dealer and advisor have when serving clients and managing their accounts.
The measures contained within the CFRs help to educate clients, inform their investment decisions and keep their interests at the forefront. While it involves additional time and effort for the dealer and advisor, there isn’t any action required on the part of the investor. For iA Private Wealth, the CFRs are a welcome development as they reaffirm our longstanding commitment to meeting the highest standards of integrity, transparency and professionalism.This article is a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.