Investment: you should inform your financial advisor about your knowledge and experience


In particular, an advisor must know his client’s ability to bear losses and his tolerance for risk. (Pixabay/rawpixel)

Since a law of 2018, a financial advisor must be asked about the specific knowledge and experience of his client before making recommendations in terms of investment. A rule confirmed by the Court of Cassation.

It is not possible to expect advice from a financial investment advisor if the client does not inform him of his knowledge and experience, his financial situation and his investment objectives. Because in such a case, according to the law, the council must refrain from recommending operations, tools and services, underlined the Court of Cassation.

According to the monetary and financial code, concerning

“rules of good conduct”

the professional was required until 2018, before formulating recommendations, to ask his client about his general knowledge and experience regarding investment to be able to recommend appropriate transactions and financial instruments.

Check risk tolerance

But since 2018 the legal requirement is more precise. The adviser must obtain this information about the experience and knowledge of his client in relation to the specific type of financial instrument or transaction he is considering, so that he can formulate these recommendations. In particular, he must know his client’s ability to sustain losses and his tolerance for risk.

In this case, a client requested reimbursement from his advisor for the loss of more than 500,000 euros recorded on his portfolio and the judges recalled that, to avoid it, the professional had to demonstrate that he had fulfilled the its obligation of advice and information adapted to the client and the planned investment, without considering that the prospectuses provided will be sufficient or that the choice of dynamic management implies the acceptance of risks.

*Cas. As, 15.6.2022, D 20-21.588

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