Information should be provided on paper, in a clear and accurate manner, in local language and free of charge or information can be provided via durable medium or a website:
- The Customer has been given a choice and agreed.
- This medium is considered to be appropriate if the customer provides an email address.
Information must be kept available for as long as the customer is likely to need it. Even if the customer has received information via a durable medium, they can subsequently request a paper copy and it must be provided free of charge.
FACT FINDING
Where relevant, the following shall be gathered:
- Information abut the types of financial instruments with which the customer is familiar.
- Information on past transactions
- The level of education and profession of the customer.
Advise can not be gathered if this information can’t be gathered.
Intermediaries should take reasonable step to ensure that the information provided is accurate. If a suitable product isn’t available, a recommendation should not be made. If relevant, business replacement analysis should be carried out.
Intermediaries should clearly explain to customers that the reason for assessing suitability is to enable them to act in the customer’s best interest.
MIFID Regulations
Under MIFID rules, the firm must obtain sufficient information from the consumer to be able to recommend the services and investments that are suitable for that consumer given:
- The consumer’s knowledge and experience in investments, relevant to the specific investment product or service being offered to the consumer by the firm.
- The consumer’s financial situation
- The consumer’s investment objectives.
Scaling the information sought
The consumer protection code specifies that in relation to obtaining relevant information from the consumer:
The level of information gathered should be appropriate to the nature and complexity of the product or service being sought by the consumer, but must be to a level that allows the financial advisor to provided a professional service.
What should be recorded –
- Knowledge and experience of suitability need to demonstrate / record.
- Willingness to take risk
- Capacity for loss – Time horizon – Age to retirement
- Accuracy of Disposable income recorded – ensuring that the customer is aware of the importance of same.
- Future liabilities for the next 6 years.
- Emergency funding
- Accessible assests
- Conflicts of interests fully documented
- Ongoing reviews of suitability – how they are recorded and managed.
Identifying Vulnerable Customers
The term Vulnerable consumer is defined in the code as an individual who:
- Has the capacity to make his or her own decisions but who, because of individual circumstances, may require assistance to do so (for example – hearing impaired or visually impaired persons) and/or
- Has limited capacity to make his or her own decisions and who required assistance to do so (for example, persons with intellectual disabilities or mental health difficulties).
The central Bank further clarified –
Identification of a consumer’s vulnerability or otherwise will require the exercise of judgement and common sense and should be bases on a consumer’s ability to make a particular decision at a point in time.
Advisors must identify vulnerable consumers during the fact-find and, depending on the level of vulnerability, must take their circumstances into account before assessing suitability, and to provide reasonable arrangements or assistance to facilitate their dealings, perhaps with a family member present.
Signing off !
Harneet K
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