When a client wants to invest—but not with you

Putting clients’ interests first is the priority

June 18, 2018 | Last updated on June 18, 2018
3 min read

The quandary

After you’ve spent several hours onboarding a wealthy new client, at your second meeting she says she’s excited about an investment you don’t offer. What do you do?

The experts:

  • Roxanne Eszes

    Roxanne Eszes,

    Financial planning content specialist, Learning Partner, Guelph, Ont.

  • Susan Yates

    Susan Yates,

    Co-owner and content specialist, C’Life Inc., Aurora, Ont.

Though it would be disappointing if the client left you, putting clients’ interests first is the priority, Yates says.

“The client has to be put in the hands of someone who has the qualifications to advise on what it is she thinks she wants,” says Yates, and providing that referral is an opportunity to demonstrate good customer service.

You should start by telling the client you’re not licensed to sell the investment, explaining that, as a result, you’re unable to place the investment and you cannot provide product-specific information.

That said, an advisor can still suggest whether the broad category of investment is potentially suitable, Yates says.

Before giving an opinion, however, you must “ensure you understand the product by doing your due diligence,” says Eszes. She adds that an advisor, particularly a financial planner, could offer insight on how the potential investment might fit with the client’s overall situation, including asset allocation and general risk. But, whether you’re a planning advisor or not, “you have to exercise reasonable judgment based on their overall financial picture,” she says.

Further, there’s nothing wrong with advisors suggesting alternative products for which they’re licensed if those products potentially meet the client’s needs as well as, or better than, the investment in question, says Eszes.

In the end, if the client chooses the investment, you must consider it as part of her overall portfolio. “Your future recommendations are going to have to take that into account,” she says.

And if the client ends up taking her money elsewhere? Your referral and initial service, including an explanation of what you offer, could lead to future opportunities with that client or other prospects.

Guidance on professional judgment and product disclosure

Rule 15 from the FPSC’s Standards of Professional Responsibility says CFPs must “exercise reasonable and prudent professional judgment” in providing financial planning advice. Guidance accompanying the rules describes the potential breadth of financial planning, and says professional judgment requires consideration of a client’s full financial picture and circumstances (goals, needs and priorities) and the interdependencies and interrelationships among them.

IIROC’s Dealer Member 3500.1 and MFDA Rule 2.2.5 set out requirements for relationship disclosure on account opening, which include written communication of products and services offered.

For insurance advisors, “The Approach,” a document developed by Advocis and other industry associations, addresses product suitability. One element includes disclosing to clients the products and services provided

“Understanding the companies the advisor represents and range of products he/she can sell helps the client in assessing if the advisor is likely to offer objective recommendations,” says the document.

Thanks to Croft Financial Group’s Rod Burylo for suggesting this scenario. To contribute your own ethical dilemmas or conduct quandaries, please email Michelle Schriver at michelle.schriver@tc.tc.

The quandary

After you’ve spent several hours onboarding a wealthy new client, at your second meeting she says she’s excited about an investment you don’t offer. What do you do?

The experts:

  • Roxanne Eszes

    Roxanne Eszes,

    Financial planning content specialist, Learning Partner, Guelph, Ont.

  • Susan Yates

    Susan Yates,

    Co-owner and content specialist, C’Life Inc., Aurora, Ont.

Though it would be disappointing if the client left you, putting clients’ interests first is the priority, Yates says.

“The client has to be put in the hands of someone who has the qualifications to advise on what it is she thinks she wants,” says Yates, and providing that referral is an opportunity to demonstrate good customer service.

You should start by telling the client you’re not licensed to sell the investment, explaining that, as a result, you’re unable to place the investment and you cannot provide product-specific information.

That said, an advisor can still suggest whether the broad category of investment is potentially suitable, Yates says.

Before giving an opinion, however, you must “ensure you understand the product by doing your due diligence,” says Eszes. She adds that an advisor, particularly a financial planner, could offer insight on how the potential investment might fit with the client’s overall situation, including asset allocation and general risk. But, whether you’re a planning advisor or not, “you have to exercise reasonable judgment based on their overall financial picture,” she says.

Further, there’s nothing wrong with advisors suggesting alternative products for which they’re licensed if those products potentially meet the client’s needs as well as, or better than, the investment in question, says Eszes.

In the end, if the client chooses the investment, you must consider it as part of her overall portfolio. “Your future recommendations are going to have to take that into account,” she says.

And if the client ends up taking her money elsewhere? Your referral and initial service, including an explanation of what you offer, could lead to future opportunities with that client or other prospects.

Guidance on professional judgment and product disclosure

Rule 15 from the FPSC’s Standards of Professional Responsibility says CFPs must “exercise reasonable and prudent professional judgment” in providing financial planning advice. Guidance accompanying the rules describes the potential breadth of financial planning, and says professional judgment requires consideration of a client’s full financial picture and circumstances (goals, needs and priorities) and the interdependencies and interrelationships among them.

IIROC’s Dealer Member 3500.1 and MFDA Rule 2.2.5 set out requirements for relationship disclosure on account opening, which include written communication of products and services offered.

For insurance advisors, “The Approach,” a document developed by Advocis and other industry associations, addresses product suitability. One element includes disclosing to clients the products and services provided

“Understanding the companies the advisor represents and range of products he/she can sell helps the client in assessing if the advisor is likely to offer objective recommendations,” says the document.

Thanks to Croft Financial Group’s Rod Burylo for suggesting this scenario. To contribute your own ethical dilemmas or conduct quandaries, please email Michelle Schriver at michelle.schriver@tc.tc.