The firm approves the shelf. The advisor has to understand what they recommend from it. Those are separate duties, and one doesn't satisfy the other. Canadian rules require each registered individual to understand the structure, features, risks and costs of the securities they recommend.[2] In the US, SEC staff have said financial professionals "cannot satisfy their own care obligations by solely relying on the efforts of others at their firm."[3]
In practice, most advisors meet that duty unevenly. They know their core products well and the rest less well. Alerts get read when there is time. Product knowledge is recorded rarely, if ever. None of that is negligence; it is what happens when there is no routine.
This guide sets out advisor due diligence as a practical routine, and how to record it. It covers what to do daily and weekly, an annual refresh and attestation that the advisor understands every product in their book; a short check before recommending a product; and how to write product notes that show real understanding. It closes with what the firm needs to provide, what the advisor needs to do, and an example written process.
It is the fourth of five guides in the Product series. It builds on From Alert to Decision, which covers how advisors respond to a single alert, and Product Approval, which covers product statuses. Client-level follow-up is outside its scope.
A routine turns product knowledge from something an advisor has into something they keep up, and can show.
| Cadence | Illustrative Time | What the Advisor Does | Output |
|---|---|---|---|
| Daily | 10 minutes | Clear Critical and Important product alerts | Alerts read; any status change acted on |
| Weekly | 30 minutes | Review status changes, new products, watch items and open acknowledgements | Acknowledgements complete; product notes written for changes that matter |
| Annually | Half a day to a day | Re-read the documents for complex and most-used products; refresh notes; attest to understanding every product in the book | Refreshed product notes; product-by-product attestation |
The timings are illustrative and depend on the size of the book and the number of products in it. An advisor using mostly broad-market ETFs will need less time than one using structured products and private funds. The point is that each cadence has a defined task and leaves a record.
Canadian regulators have pointed to firm practices such as requiring individuals to acknowledge key product information, and re-examination when a significant change affects a security.[1] The weekly review is where those acknowledgements get done on time.
Together, the daily and weekly steps are the ongoing review of the book. Any product the advisor's clients hold that changes, moves status or is removed surfaces through them, so there is no need for a separate periodic sweep. What they don't cover is products that haven't changed, which is what the annual attestation is for.
The daily and weekly routine keeps the advisor current on what changes. It doesn't confirm that they understand the products that haven't changed. Documents move in small ways that never trigger an alert: a new risk disclosure, a revised fee table, a tweak to the investment strategy. And a product recommended once, three years ago, may still be held in a dozen accounts. Once a year, the advisor steps back and confirms that they understand every product in their book.
The firm produces a list of every product the advisor's clients hold, plus any product the advisor has recommended in the past year. For each product, the list shows its firm status, complexity tier, the date of the advisor's last product note, whether required training is current, and any Critical or Important alerts in the year. The advisor shouldn't have to build this themselves; it comes from the register, holdings and alert history.
The advisor then goes through the book list and records one of three responses for each product. A single yes-or-no for the whole book would say little; a product-by-product response shows which products the advisor understands and which they don't.
| Response | What It Means | What Happens Next |
|---|---|---|
| Understood, note current | The advisor understands the product's structure, features, risks and costs, and their note written in the past year still reflects the current documents | None |
| Understood, note refreshed | The advisor re-read the current documents during the refresh and updated or wrote a note | None |
| Not able to attest | The advisor can't yet confirm their understanding, for example a transferred-in product they haven't reviewed, or a complex product whose training has lapsed | No new recommendations of the product until resolved; refresh completed within a set period, such as 30 days; off-shelf products reported to the product team |
"Not able to attest" is a legitimate answer, not a failure. An advisor who flags two products they need to review has given the firm more useful information than one who ticks every box.
Finally, the advisor signs a short statement covering the whole book. An illustrative example of a completed record, for a hypothetical advisor:
An attestation is only as good as what sits behind it. A signed statement with no refreshed notes, or with notes copied from the product summary, records a signature, not understanding. That is why the attestation is tied to the book list and the notes, and why supervisors sample the notes behind it. The fifth guide, Supervising a KYP Program, covers that review.
The routine keeps understanding current. A short check before recommending a product confirms it for the product in question.
In the KYP HubSecurity-specific questions to know before recommending: equities, mutual funds and ETFs, structured products, segregated funds and annuities, model portfolios and alternatives and private markets.
Reg BI requires a broker-dealer to exercise reasonable diligence, care and skill to "understand the potential risks, rewards, and costs associated with the recommendation."[4] The Canadian rules name structure, features, risks and costs.[2] A short product check covers both:
5. Changes. Has anything changed since I last looked? Check open alerts and the date of the last product note. If the note is out of date, refresh it first.
If the advisor can't answer one of these from memory or their note, that is the signal to go back to the product file before recommending, not after. Product-specific points to check are in Mutual Funds & ETFs, Structured Products and Alternatives & Private Markets.
A product note is the advisor's own record of what they understand about a product. It is the evidence that the routine happened.
| Moment | Type of Note | Focus |
|---|---|---|
| First recommendation of a product | Baseline note | Structure, features, risks and costs in the advisor's own words |
| Critical or Important alert, or a firm decision on the product | Change note | What changed, what the advisor reviewed, current status |
| A note is more than a year old when the product is next recommended | Refresh note | What is different since the last note, or confirmation that nothing is |
| Annual refresh | Refresh note | Documents re-read and any differences found |
One note per product, not per client. A product note records the advisor's understanding of the product. It lives with the product and is reused, rather than being repeated in every account file.
| Element | What to Write |
|---|---|
| Product | Full name and series, class or tranche |
| Sources | The documents read, with their dates |
| How it works | Structure and key features in one or two sentences |
| Main risks | The two to four risks that matter most for this product, including any that are not obvious |
| Costs | All-in cost, including embedded or performance fees |
| Status | Firm status and any conditions, and how the advisor meets them |
| What changed | For change and refresh notes: the difference from the last note |
| Date | When the note was written |
All products and figures below are hypothetical.
| Product | Weak | Strong |
|---|---|---|
| Structured note (baseline) | "Autocallable, 8.1% coupon, 30% protection." | "Example Autocallable Note Series 12. Read term sheet and pricing supplement dated May 2026. Five-year note on an equal-weight basket of three banks. Called annually if the basket is at or above its starting level; pays 8.1% for each year outstanding only on call. At maturity, principal is repaid unless the basket is down more than 30%, in which case the loss matches the basket's decline in full. Risks: loss of principal below the barrier, issuer credit risk, limited secondary market with the issuer as the main bid, concentration in one sector. Estimated value below issue price per pricing supplement. Status: approved with conditions; structured products training completed March 2026." |
| Private fund (change) | "Gate noted." | "Example Private Credit Fund LP, Class F. Read manager's notice and Q2 report. Fund applied its 5% quarterly gate; requests were about 9% of NAV, so about 55% of each request was paid and the rest carried to next quarter. No change to strategy or valuation policy. Firm review: maintain with watch. Updated understanding: liquidity risk has moved from theoretical to active; next window may also be gated." |
| Leveraged ETF (refresh) | "Still 2x." | "Example 2x Daily Index ETF. Re-read prospectus dated January 2026. Targets twice the index's daily return, reset daily, so returns over longer periods can differ significantly from twice the index, especially in volatile markets. Management fee unchanged at 1.15%; swap costs disclosed separately. No change since last note in September 2025. Status: restricted, pre-approval required." |
The strong notes aren't long. They name the source and date, explain the mechanics in plain terms, state the risks that matter most, and record the current status. A supervisor reading any of them could tell whether the advisor understood the product.
The routine is the advisor's, but the firm decides whether it is realistic. An advisor facing a hundred unfiltered alerts a day and no product summaries won't keep up, however good their intentions.