A good investment adviser
Written client agreement
First of all, your adviser should enter into a comprehensive written agreement with you before providing services to you. The agreement should clearly set out the services provided, and your rights and responsibilities. Read carefully before signing the agreement. If in doubt, ask your adviser to explain.
Know the client
As client information is key to suitable advice, your adviser has to collect and record sufficient information about you before giving any advice. The information includes your financial needs and profile, financial situation, investment experience, investment objectives, investment knowledge and risk profile. Besides, your adviser should also assess your knowledge of derivatives and characterise you based on such information.
Product due diligence
Before recommending an investment product, your adviser must have a thorough understanding of the product such as its nature and risks. In particular, before providing advice on an investment product, your adviser should have performed thorough due diligence work regarding the product and understand all material aspects of the product.
Suitable recommendation
Your adviser should make recommendations that are reasonably suitable for you, given your own circumstances. He should document and provide a copy to you of the rationale underlying investment recommendations made to you.
Disclosure of Information
Your adviser should provide you with recommended investment products' prospectuses, offering circulars, product key facts statements and other documents relevant to the investments. However, it is not enough for him to simply hand over these documents and treat them as self-explanatory for you. A good adviser should give you proper information and explanation to help you make informed investment decisions.
The adviser should also provide in writing to you details of the fees, charges and penalties (e.g. early termination) applicable to the recommended investment product. Prior to or at the point of sale, your adviser should provide sales related information to you, including the capacity (principal or agent) in which your adviser is acting, affiliation of your adviser with the product issuer, disclosure of monetary and non-monetary benefits received from the product issuer and generic terms and conditions under which you may receive a discount of fees and charges from your adviser.
Where an investment product confers a cooling-off or unwind right on investors, your adviser is expected to explain to you the cooling-off arrangement or unwinding mechanism (including the amount of reasonable administrative charge) where applicable.
