When auditors come knocking, you need to provide comprehensive, updated account documents, as well as evidence that you’ve met with all clients at least once a year.

Yet, some portfolio managers aren’t keeping detailed records, says OSC. In a 2012 sweep of 87 portfolio managers and EMDs, the Commission found 70% of those targeted weren’t properly collecting and filing people’s information. Worse, about 50% weren’t updating account information regularly, even though they’d met with clients.

Those results led CSA to release KYC, KYP and suitability guidance in January; and experts say advisors should review the guidance, even if they’re comfortable with their processes.

Inside tips

CSA’s guidance says advisors should:

  • Help clients fill out KYC forms in person. If you can’t, “carefully document [all] additional steps taken to demonstrate compliance with know-your-client and suitability obligations.” Both you and your client should sign all documents.

Read: Are your clients as wealthy as they claim?

  • Resist handing off KYC. It’s risky to delegate KYC requirements to unregistered team members, since clients may ask for product explanations or market insights. Unregistered reps can’t give advice.
  • Review KYC as often as may be necessary. CSA’s guidance suggests advisors conduct KYC reviews at least once a year. And CRM requires suitability analyses occur whenever securities are received into an account, [when] there’s a material change in a client’s life or objectives, and when you’re bringing on a prospect, says Laura Paglia, partner at BLG and co-leader of its securities litigation and regulatory group.
  • Monitor unbalanced allocations. “The higher the concentration in a particular investment in a stock, sector or industry,” says CSA’s guidance, the more steps advisors should take to document suitability. For example, be prepared to prove you personally researched products and explained all risks when a client’s allocated more than 10% to one investment.

When bringing on new clients, it’s best not to send them KYC and account forms prior to meetings, says Toronto-based industry consultant and former OSC director Susan Silma. “That may just lead to a box-ticking exercise since they’ll only focus on [what] the forms require. Also, the forms typically aren’t client-friendly, so they won’t leave a good impression with new or potential clients.”

Read: How to deal with client complaints

Instead, advisors can let people know “what types of information they’ll be talking about [and] encourage them to think about certain issues in advance,” says Silma. Also, tell them to bring as much financial information (bank statements, tax returns, information on outstanding loans) as possible to initial meetings. Then you need to unpack complex terms, like net financial assets versus financial assets.

To show you’ve prioritized compliance, says Darren Coleman, senior vice-president and branch manager at Raymond James, always use the extra commentary sections of account documents—use the space to detail clients’ financial backgrounds and risk profiles more comprehensively.

If someone’s cagey, he adds, note that on the form. Also, consider whether you’d want to continue the relationship.


If clients need extra help, try hosting seminars for small groups. Record them to prove to regulators that you’ve taken extra steps to educate investors and assess risk tolerances.

No one wants to lose money

The hardest part of getting to know clients is determining their willingness, versus their ability, to lose money, says Coleman. To do this properly, you need to assess whether a client is financially literate, and whether her return expectations are realistic. No client wants to lose money, he adds, but she’ll accept risk and losses if she understands how markets and her investments work. Show how you’ve calculated the relationship between her income, liabilities and assets, and her ability to lose money, based on her time horizon.

After going through KYC documents, always send clients follow-up letters detailing what you discussed. Keep copies as proof, and send the letters along with extra educational resources if necessary.

Read: How to protect senior clients

Katie Keir is content editor of Advisor Group.