The Wealth management industry is always evolving and change is a constant theme, but the demands placed on advisors to meet regulatory requirements are growing at an unprecedented pace.
For Canadian advisors, the introduction of stricter regulations from the Canadian Investment Regulatory Organization (CIRO) is adding new layers of complexity—especially around ongoing investment due diligence. This blog will explore how these requirements impact advisors, why they can no longer ignore their non-core holdings, and how technology plays a critical role in navigating these challenges effectively.
Investment advisors will typically have between 400 and 600 individual securities across all their client accounts. These clients' portfolios include a wide-ranging mix of securities—some actively recommended and monitored, others the product of transfers in, client-directed trades or inherited through an aquisition.
A single security may be held in hundreds of accounts or just a few. It may represent significant client assets or amount to just a few hundred dollars across 2-3 accounts. No matter the size or source, the reality is that the vast majority of the securities an advisor manages are not subjected to any ongoing due diligence.
Yet, the regulations from CIRO in the Canadian market, and under Regulatory Best Interest (RegBI) in the US, mean that advisors who do not perform documented, ongoing due diligence of every security they have in their book, will be exposed to significant regulatory risk.
Advisors naturally prioritize "core holdings." These securities are actively recommended to clients, with a high degree of familiarity around their performance, risks, and investment structure. Regular monitoring and tracking are standard practices for these key investments.
On the other hand, non-core holdings often fly under the radar. These investments may have been brought into a portfolio through client transfers, inherited accounts, or client-initiated trades. While they aren't part of the advisor's standard recommendations, CIRO regulations make it clear that non-core holdings require just as much attention. Ignoring them or failing to perform due diligence could leave advisors and their businesses vulnerable to compliance issues and reputational risk.
CIRO’s Rules 3300 and 3400 set requirements for "Know Your Product" (KYP) and the ongoing review of investments held in client portfolios. These regulations define the advisor’s responsibility to not only understand the securities they recommend but also to continuously evaluate the full range of investments in their care.
For advisors, the implications are significant. A basic securities review includes gathering data, analyzing alternatives, documenting findings, and creating reports or recommendations. This process takes roughly an hour per review. Multiply that by the hundreds of holdings across client portfolios, and the results are staggering. Reviewing a portfolio with 400 securities could take over 10 weeks of full-time work.
Unfortunately, this isn't a one-time exercise. The requirement to review securities is ongoing and can be triggered based on any material changes to any held investment. What's more, CIRO rules mandate that advisors themselves must complete this process — delegation to an assitant or relying on a firm recommended list isn't an option.
The regulatory environment adds another layer of responsibility to an advisor’s already limited capacity. Advisors routinely spend 60% or more of their time on tasks unrelated to client advisory services. Non-revenue–generating activities like compliance, administration, and documentation take precedence, leaving investment advisors stretched thin.
Adding ongoing due diligence to their workload creates a major strain. Although this new regulatory burden ensures better transparency, it limits an advisor’s ability to actually generate revenue, maintain strong client relationships, and focus on growing their business.
The result? Advisors are faced with a critical need to adopt efficient solutions.
For most advisors the only viable solution is to leverage technology to scale their due diligence process. The key lies in adopting tools powered by artificial intelligence(AI), data aggregation, and automation.
How technology can help:
AI tools can process and analyze complex investment data quickly and accurately. This includes evaluating performance, identifying risks, and even benchmarking against alternative securities. Advisors can use these insights to expedite due diligence reviews without sacrificing quality.
By consolidating information from multiple sources, data aggregation platforms simplify the process of gathering and reviewing securities data. Advisors no longer need to spend hours pulling data from various systems or reports.
Automating repetitive tasks like data entry, standardized reporting, and compliance monitoring can significantly reduce the time burden of ongoing due diligence. Advisors are freed to focus on value-added activities, such as meeting with clients or refining investment strategies.
Technology enables advisors to handle a growing client base and expanded portfolios without being overwhelmed. By implementing scalable systems, advisors gain the flexibility to comply with stringent regulatory demands while still growing their practice.
The demand for ongoing investment due diligence isn’t going away. If anything, compliance requirements are likely to become more rigorous over time. The ability to ensure smooth, efficient due diligence processes will be critical not just to surviving these changes but to thriving in an increasingly competitive environment.
By integrating technology into their workflow, advisors have a chance to build a sustainable, scalable approach to compliance. The resulting efficiency can allow advisors to spend less time navigating regulatory hurdles and more time on what matters most—strengthening client trust, providing insightful advice, and driving growth for their practice.
The evolving regulatory landscape poses new challenges for investment advisors, but also presents an opportunity to improve operational efficiency and client outcomes .With hundreds of securities under management and compliance rules that leave no room for error, leveraging AI-driven technology is no longer optional — it’s essential.
Advisors ready to take this step will benefit not only from better compliance but also from the ability to focus on building deeper client relationships and driving long-term business success.
Stay ahead of the curve and explore the latest technological tools from Flanker to help you streamline your due diligence process.
It’s time to turn a regulatory challenge into a competitive advantage.