Point of sale

Point of sale: Fund Facts must be delivered before purchase

On May 30, 2016, it became mandatory for advisors to deliver the Fund Facts document to clients before they purchase a mutual fund. Let’s explore the content of Fund Facts, how advisors must deliver it and the exceptions to the rule.

What is the Fund Facts document?

Fund Facts is a two-page, double-sided document that includes key information about a specific mutual fund, including:

  • Top 10 investments
  • Investment mix (asset allocation)
  • Risk rating
  • Historical performance
  • Information about what kind of investor the fund is appropriate for
  • Information about sales changes and fund expenses

Fund Facts was created in order to improve transparency and improve investors’ understanding of the investments they own.

Modes of delivery

Advisors can deliver the Fund Facts document either in person or electronically. Face-to-face meetings are the ideal method as advisors can hand the printed document to their client and walk them through the information. In this way, advisors ensure that their clients understand the information provided about the mutual fund.

If the client has consented, advisors can deliver Fund Facts electronically. If an advisor and client have agreed to electronic delivery, the email must contain a link to (or PDF of) the Fund Facts document. If a client is making multiple purchases, the email must contain the link/PDF for each document. Delivery via mail and fax is also permitted.

What’s most important for advisors is that they ensure their client has understood what was discussed and that they keep a record of delivery.

Exclusions

There are exceptions to the pre-purchase rule, including:

  • If a client is investing through a pre-authorized chequing plan (PAC), delivery of the Fund Facts document only has to happen before the initial purchase and annually from then on
  • Select managed solution programs that include ongoing purchases and rebalancing do not require pre-purchase delivery

The regulatory landscape for the Canadian financial services industry will continue to evolve over the next few years and beyond. It’s incumbent upon advisors – and everyone in the industry – to keep abreast of these changes. IFSE is, and will remain, a trusted source for regulatory insights for all financial services professionals.

Next up: Time Weighed vs Money Weighted Returns