Article October 2, 2020

What exactly is the duty to provide information?

It’s one of your safeguards against costly misunderstandings.

There are many complex financial products available, and none of them are one-size-fits-all. That’s why it’s vital you understand why your advisor recommends one product over another.

To ensure your informed consent, advisors who are members of the Chambre de la sécurité financière (CSF) have an obligation to provide you accurate, objective and comprehensive information on the products they propose, including their features, benefits and disadvantages, related costs and risk level. This is what we call the duty to provide information.

And it’s not just a matter of providing explanations. Advisors must also make sure you understand them. To do so, they will assess your level of financial literacy and tailor what they say accordingly.

Your advisor’s secret weapon: education

Perhaps you already know what mutual funds are? If so, your advisor won’t talk about them at great length. If not, your advisor will explain their characteristics. For example, their returns are not guaranteed and they offer different mixes of stocks and bonds. Not sure of the difference between stocks and bonds? Once again, your advisor is there to provide answers.

Your advisor may use examples, metaphors or illustrations to help explain things. Real-life examples can also be very helpful because they put you in the shoes of people similar to you, in real situations that may happen to you.

Of course, you need to do your part too, by listening carefully, and above all, by asking questions. Don’t be shy. It’s important you understand everything. After all, you’re the one making the decisions!

Another important point

• The duty to provide information is ongoing, which means it continues after the purchase of a product and throughout your relationship. If due to market turbulence you have to rebalance your portfolio, for example, or if the end of the year is approaching and it’s in your interest to report capital losses to save on taxes, your advisor must let you know.

• If your needs are outside your advisor’s capabilities, he or she must refer you to a specialist in the appropriate field: business strategy, succession planning, or taxation, for instance.