How customer-centric reforms aim to improve the quality of advice

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    Key issues

    The CFRs were originally adopted by regulators in October 2019, with the main thematic reforms being phased in over two main deadlines. Asset management firms should be deeply into the process of compliance by now, but for record keeping, here are the two most important dates for your calendar.

    Conflict of Interest Rules and Referral Agreements will come into effect until June 30, 2021. And through December 31, 2021, there are commitments related to knowing your product, knowing your customer, determining suitability, misleading communications, and compliance training.

    WP spoke to Ian Tam, Morningstar Canada’s Director of Investment Research, about the reforms, what they entail and why they are needed. He said the reality is that clients in Canada are exposed to a wide range of advice and that of course not all advisers are created equal and the advice investors receive may vary based on the amount of assets available to invest.

    He explained: “From branch advice to full-service brokers, there is a fairly wide range of advice on offer. The good thing about these reforms is that they essentially oblige all advisors led by the CSA to a higher minimum standard of behavior. In a way, it levels the playing field by asking advisors to run processes that raise the minimum standard of quality for all investors in Canada. “

    Know your customer

    Two key points of the CFRs are the KYC and KYP sections. The main part of the KYC requirement is that the CSA has separated risk tolerance and risk capacity and together forms a so-called “risk profile”. Tam said this is important as both are vital for a counselor to be able to make an appropriate recommendation.

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