In the securities industry, the cardinal rule for an advisor is called "Know Your Client" (KYC). Your advisor must ensure that all their recommendations are “suitable” for your risk profile and financial circumstances. Your advisor is required to have you

• complete KYC forms before the initial transaction
• update them regularly

Assessing your risk tolerance → the basis for recommendations.

There are no specific "Know Your Client" forms for insurance advisors, but the requirements are similar.

Your advisor will want to know your

• investment objectives
  • e.g., safety of principal, income or capital growth
• risk tolerance
  • low, medium or high
• tax situation
• time horizon
• personal preferences, etc

Regular reviews take place (e.g., annually)

Your advisor must

1. monitor your needs via periodic reviews
   • e.g., remind you when premiums is due, provide ongoing service
   • note changes in your financial situation
2. document the relationship with you
   • keep a record of
     • conversations
     • meeting agendas
     • your instructions (verbal, written)
     • information given to you
     • instructions and information given to third parties about you
     • all transactions
     • all correspondence, including e-mail

For Insurance

• your advisor will match product recommendations to your needs, financial resources and risk tolerance
• your advisor needs to understand your
  • financial situation and financial objectives with respect to insurance
  • ability and willingness to tolerate
  • ability to pay premiums
  • personal circumstances which may indicate a need for change in coverage (e.g., the birth of a child)

The Process

1. gather and analyze information
   • insurance and investment needs
   • insurance and investments in place
   • debt
   • funds available for investment
   • which investments would meet the objectives
   • review: tax returns, insurance policies, wills, estate plans
   • learn: about risk tolerance and lifestyle
2. establish financial objectives
3. develop strategies to meet the objectives
4. implement plans
5. monitor the plans
6. modify the plan

(throughout, document the meetings, discussions, decisions)