With the implementation of the final half of the CSA's Client-Focused Reforms on December 31, 2021, the wealth advisory industry has had to shift dramatically to adapt. Many requirements further constrain agents' time that could be used to build their books of business. Your advisors now need access to and provide much more information about investment products. "Know your product" and "know your client" require strict adherence from advisors to protect their careers and the interests and earnings of your firm.
The law also creates benefits for your wealth management firm when addressed with the right solution. Advisors will have increased engagement with clients and reasons to reach out on a regular basis. Clients will feel better cared for, informed, and be more loyal. The firm's brand value grows with increased client satisfaction and referrals can be expected to be a result.
Here are some of the most significant impacts on advisors and wealth management firms:
Compliance with the "know your client" requirement means recording risk tolerance and financial ability to withstand losses for every client. The results must be reviewed with clients once a year, and reasonable measures must be taken by advisors to update the information regularly.
Recording this information should be part of your firm's client engagement strategy to show diligence in meeting the requirement. It cannot be locked away in a siloed CRM system.
Know and Provide More Information
As part of the "know your product" requirement, your agents must know the product offerings well, including their clients' initial and ongoing costs to hold the security. They must make an appropriate determination that puts the client's best interests first, comparing different securities against one another.
Having easy access to the necessary information is essential.
Provide Enhanced Information
When clients open accounts, your advisors must provide enhanced information about the scope of products and services offered to ensure a better understanding for the client. Your advisors must disclose investing costs (including compounding effects), limitations to offerings (like only offering proprietary products), and any significant restrictions to the products or services made available.
If your wealth advisory firm only offers proprietary products, advisors must show that their recommendation is competitive and of similar quality to other products on the market.
Providing easy access to this enhanced information through an integrated system will tremendously impact compliance and advisor efficiency.
Conflicts of Interest
The most significant purpose of the law is to ensure that the fiduciary duty is honoured by the firm and its advisors. Advisors must disclose any possible conflicts of interest, how they are being addressed to the client's best interests, and how the recommended product suits the client's situation.
Should a client misunderstand at some point and a local securities regulator pays a visit, having such conversations noted on client accounts could be a lifesaver.
Dropping the Titles
Advisors not functioning in the role of an actual firm executive under corporate law may no longer use sales-based titles, such as vice president, or hold themselves out in such a way that could misrepresent their qualifications and proficiencies.
The Overall Impact
Client Focused Reforms require much more information to be provided to clients and the recording of client transactions. Advisors need to invest time in ongoing learning and understanding of products and services. Reminders must be set for an annual review with their clients.
This law reduces the time available to build a robust book of business and increases the risk to the advisors and the firm if compliance is inadequate.
A robust, integrated advisor desktop that integrates client data and engagement systems can assist with these needs and protect your firm while saving your advisors' time.