Investing 101
Duty to Warn of Risks
Financial advisors must provide their clients with suitable investment recommendations.
Financial advisors must disclose the risks associated with their investment recommendations to investors as part of this duty. This includes informing investors of the potential risks involved with a particular investment or strategy and providing suf
Financial advisors must provide their clients with suitable investment recommendations.
Financial advisors must disclose the risks associated with their investment recommendations to investors as part of this duty. This includes informing investors of the potential risks involved with a particular investment or strategy and providing sufficient information to make an informed decision about whether to proceed with the investment.
Financial advisors must also ensure that their clients understand the risks involved with the investment and the potential consequences of their investment recommendations. If the risks associated with a particular investment are deemed to be significant or beyond the investor's risk tolerance, the financial advisor has a duty to warn the client of these risks and recommend alternative investment options.
A variation on this is when a financial advisor recommends an investment strategy. Examples include high-risk strategies such as commutations of pensions (taking cash instead of a pension); margin investing (borrowing from the dealer to buy more investments); leverage investing (borrowing from a bank/LOC/mortgage to invest); short-term investing (investing money that will be needed in the next few years), etc.
In summary, the duty of a financial advisor is to provide suitable investment recommendations to investors and to disclose and warn their clients of any potential risks associated with those recommendations.