At FSRA, we’re focused on helping you understand and meet your responsibilities.

One of the most common questions we receive is around the amount of documentation required for record keeping, especially for suitability assessments.

Read on to learn more about documenting suitability assessments.

Is the product suitable?

Many brokerages focus their compliance efforts on documenting how and why a mortgage should be funded but fail to capture why the mortgage is suitable for the borrower.

Your documentation should tell a clear story of how you determine your mortgage recommendation is suitable to your specific client, so that if another broker was to review your file, they would come to a similar conclusion (a process known as “re-performance”).

More than box ticking

Documentation is also more than ticking a box that documents have been submitted.

You must also ensure that they follow a logical story and demonstrate the rationale for a given product recommendation.

Here are a few tips and best practices for documenting suitability:

  1. Compliance begins the moment you first engage with a client. Every decision should be documented as it's made to provide a clear, step-by-step path to the final product recommendation. Simply showing that you collected client information isn’t a suitability assessment – collected information helps you carry out a suitability assessment. Your documentation should “tell the story” of the transaction from start to finish, including why certain decisions were made.
  2. Record-keeping is about the narrative. A well-documented file should demonstrate which actions were taken, why and how they influenced the final mortgage recommendation. Remember that under the law (MBLAA), you're required to recommend suitable products. Without enough proper documentation to show the narrative, brokerages cannot verify that the mortgage recommendation was suitable and therefore cannot verify compliance.
    • Don’t forget that the more complex or unique a client’s circumstances are, the more notes and explanations are required to understand the decision-making process. This is even more important with private mortgages and other, more tailored, financing options.
  3. Re-performance is Essential. If your brokerage cannot “re-perform” the suitability assessment using only the documentation you’ve kept in the file, it means key details are missing. It is more than completing and keeping know-your-client forms and applications – they only show the information you had. Proper records should provide detail about how and why that information led you to recommend a specific product. This allows for transparency, ensuring that anyone reviewing the file can follow the decision-making process. This becomes critical in the event of examinations, complaints, or legal challenges.

Why Does This Matter?

Failing to document the suitability assessment process properly can put a brokerage at risk. Without a clear record of how a recommendation was made, it becomes difficult to defend decisions if a client files a complaint or regulatory scrutiny arises. Compliance is not solely about justifying a chosen mortgage, it’s about proving that the product was recommended based on how well it responded to specific client needs at that point in time, making it a suitable product for the client.

Review your current compliance practices. Are you merely proving that a deal should be funded? Or are you documenting the journey to your recommendation? Ensure that your process captures both the “how” and the “why” of your decision making.