ADVISOR DISCLOSURE. An Overview. February 2007

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1 ADVISOR DISCLOSURE An Overview February 2007 TM Trademark of The Empire Life Insurance Company. Policies are issued by The Empire Life Insurance Company.

2 A brief history Fall 2004: insurance regulators established an Industry Practices Review Committee as a result of investigations in the U.S. (Spitzer). Focus on review of compensation and incentive practices and potential conflicts of interest. December 2004: Canadian Council of Insurance Regulators (CCIR) sent detailed questionnaires to life and health insurers. AMF sent similar ones in Quebec. June 2005: regulators produced a discussion paper and summarized the results of their reviews. The report concluded there was no illegal activity and that most insurers have policies in place governing intermediaries. However it provided some areas of concern and asked for comment from the industry. 2

3 History cont d Most of the industry response was opposed to any regulations being imposed to deal with the concerns. It was recommended that the regulators allow time for the industry to fully implement the advisor disclosure initiative that was occurring with the help of the CLHIA reference document. February 2006: regulators released a new paper which proposed a broad approach to regulation consistent with the industry recommendations. They proposed three principles for managing conflicts of interest. 3

4 Managing Conflicts of Interest 3 Principles 1. An intermediary must place the interest of policyholders and prospective purchasers of insurance ahead of his or her own interest; 2. Consumers must receive disclosure of any actual or potential conflict of interest that is associated with a transaction or recommendation; 3. The recommended product must be suitable for the needs of the consumer. 4

5 Advisor Disclosure With respect to the second principle regulators anticipated this would include: Companies they represented Methods of compensation Other financial relationships and non-monetary benefits Extent of search for suitable product/competitive price 5

6 Advisor Disclosure In response the industry fully supported the broad approach to Regulation. By following the advisor disclosure protocol the first three items were being met. It was suggested that the fourth item be included in product suitability requirements. In June 2006 regulators advised that they had endorsed the three Principles and would be following up to see how they are supported. 6

7 What should advisors be doing? Provide each client with a notice of disclosure that contains all the items set out in the CLHIA reference document. Stay informed. Keep up to date on what is happening in the industry and what is required. Keep copies of the notice of disclosure given to each of your clients. Record keeping is important for all aspects of the sale. It protects all parties involved. 7

8 Notice of Disclosure Your notice of disclosure should include the following elements: Companies you represent Nature of relationship with companies represented How advisor is compensated, including any additional compensation, such as travel incentives Conflicts of interest Consumer right to ask for additional information 8

9 Advisor Disclosure and Empire Life Applications now include an acknowledgment statement on the Advisor s Report indicating disclosure has been provided to the client. It is now a requirement to provide a sample copy of the disclosure notice to be able to attend conference. This sample is required to be provided at time of registration. There is a new compliance section on the website that contains information on Advisor Disclosure, including a sample disclosure statement that is editable. 9

10 Advisor Disclosure Questions???? 10

Reference Document: Serving Clients Through Needs-Based Sales Practices

June, 2017 Reference Document: Serving Clients Through Needs-Based Sales Practices Canadian Life and Health Insurance Association Inc., 2017 Reference Document: Serving Clients Through Needs-Based Sales