Putting your interests first

A new set of rules for the investment industry,
Client Focused Reforms, will help ensure that your interests, as an investor, are always put first.

Client Focused Reforms are new rules your investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition firm and advisor must follow that make it clear that your interests, as their client, must come first. Client Focused Reforms increase investor protection and the new rules are fully effective in all provinces and territories as of December 31, 2021.

Conflicts of interest

Your advisor must address material conflicts of interest in your best interest. They must put your interests first. They also must provide you with information on any limits on the investment products they offer as well as fees, costs and risks.

For example, your advisor may get paid a higher commission for selling you a certain investment. This may create a situation where your advisor could lean towards recommending one product over others. However, under the new rules, your advisor and investment firm must address this material conflict of interest in your best interest.

Changes to expect

Previously, when recommending an investment product, your advisor was only required to determine whether it was suitable for you. Client Focused Reforms sets an enhanced standard.

Your advisor will now have to consider specific factors when deciding whether an investment is suitable for you, including:

  • the investment’s features, structure, risks, initial and ongoing costs.
  • the potential and actual impact of costs on your return on investment.

Your advisor’s recommendation must put your interest first.

Investment firms and advisors must clearly communicate to you their role and the types of products and services they may or may not offer. This could include disclosures of any restrictions on the ability to liquidate or resell an investment.

Call out: Your investment firm and advisor must address any conflicts of interest in your best interest. Client Focused Reforms are an important investor protection initiative based on the concept that the interests of the client come first.

Questions to ask your advisor

There are questions you can ask your advisor to ensure you are fully aware of what your advisor can do and how they’ve addressed material conflicts in your best interest:

1. Are you and your firm registered? Anyone selling securities or offering investment advice must be registered with a securities regulatorSecurities regulator A government agency that enforces the securities act in jurisdiction it has authority over. This act is made up of laws that establish rules for issuing and trading securities. The Ontario Securities Commission is the securities regulator for Ontario.+ read full definition.

2. What are your qualifications? You can ask them about their experience, educational background and what designations they have.

3. How are you compensated? It is okay to ask if your advisor is paid by salary, a commission, or a combination of the two. They may be compensated based on the trades they do for you, or, based on a percentage of assets in your accountAccount An agreement you make with a financial institution to handle your money. You can set up an account for depositing and withdrawing, earning interest, borrowing, investing, etc.+ read full definition.The investment firm your advisor works at may also have other compensation arrangements or incentive practices for their advisors that also determine how your advisor is compensated when servicing you.

4. Can you explain how you’ve addressed material conflicts in my best interest? What are these conflicts?

5. How often should we talk about my personal and financial circumstances, my investment needs and objectives, my risk profile and my investment time horizonTime horizon The length of time that you plan to hold an investment before you sell it. This may be a brief period of time or span as long as decades, depending on your financial goals.+ read full definition?

6. Can you offer me any products or services available in the market or are there any limits on the availability of products or services that you can offer? If there are limits, what are they?

7. Do you offer primarily or exclusively proprietary products?

8. How will you determine what investment is suitable for me and puts my interest first?

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