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November 22, 2018

Do the right thing for your clients

2 min read

Advisors should use the proposed client-focused reforms as an opportunity to strengthen relationships with clients.

The Canadian Securities Administrators’ (CSA) client-focused reforms are a hot topic in the investment industry as the comment period for the proposals, which closed in mid-October, garnered more than 130 letters to the group of provincial and territorial regulators.

We’re now in wait-and-see mode for the CSA’s next steps. Although we don’t know what specific changes the regulators will make to the proposals, we know where they’re headed. And our industry will face lots of changes to the way we do business as a result.

Moreover, I fear that as the reforms are implemented, they won’t actually lead to the “meaningful interactions” between financial advisors and their clients that the CSA is hoping for. Instead, the reforms may lead to more process, longer forms and more complexity for investors if implementation proceeds as it usually does for major regulatory initiatives. We should do everything we can to avoid that.

Most advisors are trying to do the right thing for their clients. Advisors are committed to helping clients improve their wealth and save for important goals. Soon, the regulations will mandate that advisors do the right thing. There’s going to be no contest between doing what’s good for the client and what’s good for the advisor — what’s good for the client will always win. Thus, advisors should keep that in mind to guide any decisions they’re facing.

Also, let’s ensure that the client-focused reforms don’t result in unnecessary additional paperwork and process. Of course, you need to show that you’ve taken the right steps to know your clients; but the focus really should be on the conversation, not on the paperwork.

Although we won’t know for some time how these reforms will shake out, here are some proactive steps you could start taking now:

> Listen to your clients actively

The heart of the “know your client” (KYC) requirements is for advisors to develop a meaningful understanding of their clients so that advisors can best help clients invest to reach their goals. Even if the regulations ultimately require you to gather more information, don’t approach the KYC obligations as a box that needs to be ticked off. Instead, consider your KYC obligations as a great opportunity to hear what’s going on in your clients’ lives and ensure that their investments are appropriate for them.

> Use transparency to your advantage

Be open with your clients about why you're recommending something and how it impacts them, although not in too much detail. Think about the impact through their lens; what does it mean to them? Don’t be afraid to use transparency even around difficult topics. I call this radical transparency, and it will actually help cement their trust.

> Support your firm in implementing technology

Don’t be afraid of technology-enabled solutions and processes. Technology will not threaten the client/advisor relationship if you’re adding value for your clients. Rather, it can help automate some of the cumbersome processes and non-value-added steps, and free you up to have more meaningful conversations with your clients.

> Join a working group

Many financial services firms are creating advisor working groups around the client/advisor relationship, or setting up technology test groups to understand the impact of technology changes on the advisor and the client. Join a group at your firm. That’s your opportunity to help leverage the technology, yet still shape a more natural client conversation and develop a better way to engage with your clients.

Although the CSA’s client-focused reforms are far from final, it’s fair to say we know the direction in which the regulators are taking us. So, be proactive when you can. Take steps now to frame your conversations in a way that will make the changes make sense for your clients.

Want to know more about the proposed client-focused reforms? Check out this related article: CSA’s proposed reforms could have major implications. Or contact us to talk about the implications for your firm.


As published November 22, 2018 by Investment Executive, Susan Silma’s Compliance CX article for Inside Track.


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