Obligations of the advisor working with NEF
The needs analysis tools NEF recommends:
In order to advise your customer on products that suit them, make sure you have all the information you need. Make sure you have a complete knowledge of the facts before making a recommendation to a client. First of all, you need to know the person who is in front of you, their goals, needs, family situation, etc.
You must make a diligent effort to obtain full information about the financial and personal circumstances of every client or prospective client prior to making a product recommendation. Any specific product choice or recommendation should be made on a fair and balanced basis.
The following information must be taken into consideration:
- Client’s insurance needs;
- Existing policies or contracts they already hold and their features; Names of the issuing insurers;
- Client’s investment objectives (including investment horizon and risk tolerance);
- Client’s financial literacy;
- Any other information necessary to understand his situation and needs, for example:
- financial situation;
- number of dependents;
- personal obligations;
- Family obligations.
We strongly recommend the use of software, either the ones provided above or from the various insurance companies as well as other tools to assist in determining a client’s or prospective client’s needs.
You should ensure the results of the needs analysis are clearly documented and retained in the client’s file.
What if the client refuses?
Sometimes it happens that a client is reluctant. He maybe doesn’t want to provide personal or financial information.
It is important to know that you cannot be relieved of your obligation to perform a proper needs analysis, and this, even with the written consent of your client. Your obligations in this matter are mandatory, and you must comply. You cannot service the client without performing a proper needs analysis.
If you do not have a customized version of a financial needs analysis, we suggest printing one of financial outline forms below:
IMPORTANT: THE REASON WHY LETTER AND RECORDS OF DISCUSSIONS
The Reason Why Letter NEF recommends:
As of July 1, 2018, the CLHIA requires advisors to clearly document discussions with their clients to show how the advisor assessed their needs. A Reason Why Letter, sent from the advisor to the client, helps the client understand why the product recommended/purchased is suitable for them.
Advisors can build trust with their clients and protect themselves and their business with this brief, easy-to-understand letter or email that is an important aspect of sales suitability documentation. This industry requirement acts as a written explanation, for both the advisor and the client, of the product(s) an advisor has recommended – it helps clients confirm their understanding of what they have purchased, its intended goal and how it meets their needs.
Other Reason Why Letter samples and templates you could use:
For more details about serving the client through needs-based sales practices, please review the following CLHIA document:
You must give the customer the analysis documents that you used for your recommendations. To demonstrate that the documents were handed over, we suggest you ask the client ot sign the AgenZ acknowledgement below:
Our online tools are designed to automatically send a copy of the form to the client and to you. Please make sure the client’s email address and yours are properly collected in the form to assure email delivery of the filled out and signed form.
CLIENT FILE & RECORD RETENTION
To comply with privacy requirements in setting up and maintaining a complete client file, you should adhere to the following:
- Obtain the Client’s Authorization to collect, use, communicate and retain the client’s personal information.
- Only collect and keep information required to do your job; that is, to determine the needs of your client, to recommend the appropriate products and provide ongoing service. You are personally responsible for all information in the file. Do not keep information that is not required to carry out these tasks.
- Collect client information directly from the client and do not release this information to a third party without your client’s authorization.
- Keep client files secure and the information confidential. Do not leave client information exposed where it could be viewed by others. Use a shredder when disposing of material containing personal client information.
- Privacy laws allow clients certain rights of access to their files. Only keep what is relevant to your business dealings with your clients in your file.
The Client’s Authorization forms NEF recommends:
It is prudent to keep in your files only information related to the sale of financial security and investment products. If you believe you have a need to keep any additional information or documents (like those from examples above), we recommend that you adhere to the following:
- You should have the client sign the appropriate area(s) of the Authorization form allowing you to retain this material.
- You are solely responsible for the safe keeping of this material, for maintaining its confidentiality and for its return to the client.
WHAT YOU SHOULD KEEP IN YOUR CLIENT FILES
- Client’s authorization and privacy consent(s)
- Advisor disclosure form signed by the client
- Fact finder (including client name, date of birth, address, telephone and fax numbers, e-mail*)
- Financial/retirement needs analysis, client’s objectives, goals and priorities
- Proposals and recommendations
- Documentation when a client decides not to act on recommendations
- Investment risk assessment
- In-force illustrations discussed or reviewed with clients and any additional notes or comments attached
- Sales aids and/or illustrations used in presentations
- Copy of the Notice of Replacement form completed at the time of replacement of an insurance policy
- Copies of replaced contracts
- Copies of savings/investment/income applications where applicable
- Date of signature of the application or of the request for service, the mode(s) and date(s) of payment of the product sold or of the service rendered
- In-force delivery illustration with The Policy Delivery Receipt and Acknowledgement page
- Copies of subsequent trading transaction forms
- Limited trading authorizations and MTAF (multiple transaction authorization form)
- Forms from various transactions/requests (e.g. Use of funds form, loan/dividend requests, premium vacation form, client service request form)
- Copies of correspondence (from advisor, client or home office), including emails, letters, and faxes
- Summary of discussions or meetings with clients
- Log of telephone conversations, noting the date and nature of the call and of unsuccessful attempts to contact the client, to verify your attempts to provide proper service
- Documentation of client concerns and complaints
- Group files: Name of policyholder, name of contact person, all bids and proposals*
- Financial Planner (CFP) files: Engagement letter) and copy of the report.
* Required in Quebec only
WHAT YOU SHOULD NOT KEEP IN YOUR CLIENT FILES
Information and materials, which are not needed to meet the obligations of your duties as a financial advisor, should not be in your client files.
These include, but are not limited to:
- copies of medical information
- original insurance policies
- original wills
- original powers of attorney
- original marriage certificates
- income tax returns or notice of assessments
- original mortgage/real property ownership papers
This list will allow you to verify that all required elements are present in your customer file:
MANAGING CONFLICTS OF INTEREST
Priority of client’s interest
You must always act in the best interest of your client when providing advice. This means placing the interests of your client above your direct and indirect personal interest. A “conflict of interest” occurs when your actions or private interests interfere, or may reasonably be perceived to interfere, in any way with your ability to act solely based upon the interests of the client.
A conflict situation may arise when you take actions or have interests that may make it difficult for you to effectively determine or recommend the products most appropriate for the client.
A conflict may also arise if outside activities affect or appear to affect your judgment to act in the best interest of clients.
Disclosure of actual or potential conflicts of interest
You must provide written disclosure information about your background, your business, and your method of compensation to clients in order to give notice of actual or potential conflicts of interest.
You must also comply with applicable industry and legislative requirements in this regard. This includes disclosing in writing to a client or prospective client any conflict of interest or potential conflict of interest that is associated with a particular transaction or your recommendation. This information assists clients in assessing the objectivity of advice offered by you. Your strict compliance with disclosure requirements is important in enhancing consumer confidence in you, our products, and our industry.
THE ADVISOR DISCLOSURE
The Advisor Disclosure form NEF recommends:
Key areas for disclosure
Before you complete a sales transaction, you need to disclose five items to a client in writing. These are:
- The financial services companies you represent;
- The nature of the relationship between you and an insurance company;
- How you’re compensated and by whom;
- If you may be eligible for additional compensation, including cash or non-monetary compensation;
- Potential conflicts between your interests and those of the client.
When a consumer plans to purchase a life or health insurance product, it is important that they have relevant information about the product, how it meets their needs, the company offering the product, the advisor and the latter’s business ties. The NEF Advisor’s Disclosure relates to the information concerning the advisor which must be provided in writing to the client prior to the sale transaction …
COMPLAINTS HANDLING POLICY
All representatives and employees of NEF are required in case of a complaint from the public or a client, to act as per:
TO BE FINALIZED: BUSINESS CONTINUITY PLAN
All firms, independent representatives and firms must develop a business continuity plan. Business continuity plan to finalize:
For the protection of the privacy of our clients, all representatives and employees of NEF are obliged to know and act in accordance with:
It’s important for all of us to be diligent about protecting our clients’ information. Establishing effective controls, security and privacy practices – and ensuring the personal information you collect is protected – helps maintain client trust and confidence.
MONEY LAUNDERING AND TERRORIST REPORTING
The “Law on the Proceeds of Crime and Terrorist Financing” requires that we follow strict rules and regulations to comply with it. As a member of the NEF team, you must familiarize yourself with:
What is money laundering?
Designated offenses include drug trafficking commonly associated with money laundering, but they also include the following acts:
- Bribery of judicial officers
- Operating a gambling house Child Pornography
- Taking bets
- Breach of trust by a public servant Forgery
- Operating a brothel prostitution Robbery
- Bribes Theft
- Tampering with market operations Extortion
- Fraud against the State
- Possession or development counterfeit currency
- Corruption of morals Fraud
- Tax evasion
You must familiarize yourself with the requirements of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and comply with it. Under this legislation, any person, including financial advisors and mutual fund representatives, who performs transactions with customers must:
- Report any suspicious transactions and attempted suspicious transaction to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and if applicable, the RCMP and CSIS, whether the operation is linked to money laundering, financing of terrorist activities or tax evasion;
- Overview of indicators of suspicious transactions
- Submit a declaration of property belonging to a terrorist group to FINTRAC if the person conducting the transaction is in possession or control of a property deemed to belong to a group terrorist or be controlled on behalf of a terrorist group.
You can find more information on FINTRAC’s Web site:
- Your obligation to report suspicious transactions
- Suspicious Transaction Report Form
- How to fill in a declaration in the FINTRAC’s Web site: http://www.fintrac-canafe.gc.ca/guidance-directives/transaction-operation/1-eng.asp
FAIR TREATMENT OF CUSTOMERS (CCIR)
This guidance sets out the Canadian Council of Insurance Regulators (“CCIR”) and the Canadian Insurance Services Regulatory Organizations (“CISRO”) members’ vision, including their expectations relating to conduct of insurance business and fair treatment of Customers.
Please click on the below link in order to access the document:
REPLACING AN INSURANCE POLICY
Whenever you recommend an existing insurance policy to be cancelled or modified in any way as a result of a new insurance proposal, you must properly compare the advantages/disadvantages of the new proposal with the advantages/disadvantages of the existing policy to be modified/replaced. The Notice of Replacement form MUST be properly and legibly completed and a copy of it must sent to the issuer of the existing policy, to the issuer of the proposed contract and to the insurance owner within 5 business days.
Please follow all directions provided on the Notice of Replacement form available for download here
ADDENDUM FOR THE IA DIPLOMA RESP ACCOUNT OPENING
For any Industrial Alliance Diploma RESP plan opening, NEF requires that you properly explain all applicable plan fees and plan cancellation/modification rules and have the client sign the following addendum:
OTHER COMPLIANCE TOOLS AND RESOURCES
Canada Anti-Spam Law
Ontario Regulations on Borrowing to Purchase Life Insurance Products