I’m curious - if you (as an American) are holding mutual funds in the US through a bank or any other place you can get mutual funds, are you required to answer a risk tolerance questionnaire periodically to see if your investments make sense in terms of what you are willing to risk? If so, how often to you need to do that? What happens if you don’t?
I’m just curious whether this is a Canadian “thing” or whether you guys need to do it too. It’s my understanding that in Canada it is a legal requirement. The places I hold mutual funds bug me periodically to update my “know your client” information, and I have had transactions refused when I’ve ignored the requests for too long.
This is pure curiosity only; all the financial institutions I deal with are Canadian and that won’t change.
No, it is not a legal requirement.
If I’m supposed to be doing that, the folks at Principal haven’t let me know about it.
US stockbroker here.
It depends if the investment was solicited or not.
If I call you up and suggest a mutual fund to buy, I need to know your investment needs.
If you call me and say I want to buy fund xyz then I can sell it to you without the know your client rules.
However, there are some things to consider.
Of course, if the fund offers breakpoints or has different classes of shares, I’d be required to tell you about that. I, myself, don’t handle anything but no load mutual funds so I don’t have to deal with that.
Also, some firms may want the person selling the fund to do know your client regardless of what is being purchased. My firm does know your client for some types of investments even though we aren’t required to.