Financial Planning Regulations

From Planipedia

The ability for advisors and firms to provide “planning” advice in Canada is a regulatory mosaic depending on the province you are in, your professional designations, if you are registered with IROC (stocks) or MFDA (mututal funds) for the sale of investments, the Insurance regulator and more. A general “ambiguity” about what constitutes “financial planning” compounds this challenge.

This paper is not a “legal interpretation” but an amalgamation of general observations initially by PlanPlus resulting from interaction with firms operating within various domains in Canada and abroad. It is designed for corporate customers implementing “advisory services”.

There are four key issues we want to address from a regulatory and a best practices perspective:

1. ) What is the dividing line between financial advice and financial planning?
2. ) Who can hold themselves out as financial planners?
3. ) What are the responsibilities of the sponsoring firms?
4. ) Who can develop and deliver a financial plan?

Contents 1 What is the dividing line between financial advice and financial planning? 1.1 Does it matter what we call a document – a financial plan, a financial strategy, a financial needs analysis? 2 Who can hold themselves out as financial planners? 2.1 Summary 3 What are the responsibilities of the sponsoring firms? 3.1 Requirements 3.2 Summary 4 Who can develop and deliver a financial plan? 5 Principles of Client Care 6 Summary of Best Practice & Regulatory Standards 7 APPENDICES 7.1 (Appendix 1) FINANCIAL PLANNERS STANDARDS COUNCIL AND THE CFP DESIGNATION 7.2 (Appendix 2) MFDA Financial Planning 7.3 (Appendix 3) BCSC - For Financial Planners 7.4 Fee for Service 7.5 (Appendix 4) Alberta Securities Commission

What is the dividing line between financial advice and financial planning?

PlanPlus actively monitors financial planning standards in Canada and globally. There is a growing body of regulations and standards with the publication of documents like the “ISO Global Standard 22-2-22 Personal Financial Planning – Requirements for Personal Financial Planners” and more recently (December 2006) the Financial Planning Standards Board “CFP® Professional Competency Profile”. These standards are finally providing clarity about what constitutes the difference between general financial advice that is pervasive in the industry and financial planning – an evolving profession.

According to the Financial Planning Standards Board (See Appendix 1). Financial planning is a process that determines how you can best meet your life goals through the proper management of your financial affairs. Key to effective financial planning is the ability to take into account all relevant aspects of your financial situation, and to identify and analyze the interrelationships among sometimes conflicting objectives. It is this unique integration of knowledge and skills across a broad range of topics that distinguishes professional financial planning from other related financial advice.

Components of a Financial Plan Financial Planning consists of six fundamental components – Financial Management, Tax Planning, Asset Management, Risk Management, Retirement Planning and Estate Planning. These are all defined in the appendix of this document.

And

What is the Difference Between Financial Planning And Financial Advice? With Financial Planning, none of the above components are ever dealt with entirely in isolation – it is the integration and interdependencies among these components, as well as the need to analyze and synthesize information presented to formulate strategies, which distinguish Financial Planning from other forms of financial advice or financial intermediation.

There remains a judgmental and grey area in respect to complexity and integration. By their nature computer software can perform complex calculations – but does this make it a financial plan? Although advice is a continuum, conceptually PlanPlus trains to four levels of advice delivery.

1. ) Modular Needs Analysis (calculators)
2. ) Life Goals Needs Analysis
3. ) Financial Planning
4. ) Advanced Financial Planning

Modular Needs Analysis – Calculators abound in the industry. Consumers can even find retirement calculators on some of the web sites of the regulators. By their very nature calculators are modular and do not integrate the needs of the client across all areas. Modular needs analysis can typically be addressed in a matter of a few minutes.

Life Goals Needs Analysis – A Life Goals Needs Analysis is the primary form of analysis generated in Web Advisor and incorporated into our “Personal Financial Strategy” (PFS) document. It combines multiple financial goals and can be incorporated into or form the basis of a financial plan, but we feel that by itself, it should not be presented to the client as “financial planning”. This type of analysis, although more robust than a calculator can usually be completed in 30 to 60 minutes.

• It includes a more powerful retirement or life goals analysis using graduated tax calculations – basically a much more exact calculation than average-tax rate calculators;
• It illustrates tax liabilities throughout the client life, but does not include “tax planning”
• Although it identifies needs on death and disability using a life goals approach, it does not integrate how gaps in risk management might be resolved in light of other financial demands.
• It does not include any estate planning

Integrated Financial Planning – This is a definitive level of service above generating a PFS document. Although some of the analytical components might be the same, the process, discovery, rigour of analysis taken by the financial planner, and the integration of the various goals through the recommendations or action plan extends the basic analysis to become a financial plan. This level of financial planning may require between 3 and 5 hours to complete.

Advanced Financial Planning – This type of planning occurs based on the complexity of the situation. When clients have complex business interests, or assets located in other countries, or major pension decisions or a combination of such issues, this can expand the scope of the engagement – create the need for multiple tools and analysis – require possible referrals to other experts and more. This type of financial planning might run from 15 to 25 hours per plan.

Does it matter what we call a document – a financial plan, a financial strategy, a financial needs analysis?

The short answer is “Yes” – it can matter what we call the document as a result of expectations and clarity for the client. A firm should aspire to achieve 3 objectives:

1. ) Where clients need advice, assess the complexity of their needs to direct them to an appropriate level of service. We do not want clients receiving a level of service that is insufficient for their needs and have them believe it is sufficient.
2. ) Provide clear disclosure in the engagement on the scope of the service they are receiving and why we believe that to be appropriate to their needs.
3. ) Ensure that advisors with the necessary qualifications are involved with the more advanced planning services.

If a more basic needs analysis is called a “Financial Plan”, a client may mistakenly believe that they have received “comprehensive advice” but some important factors may remain un-addressed. If on the other hand we perform what is substantially a true financial planning exercise for a client and try to treat it as something less to avoid the process related requirements we do our clients and ourselves a disservice.

Who can hold themselves out as financial planners?

There is no issue with an advisor providing some level of advice to their clients – the issue is when advisors hold themselves out as “financial planners”.

Quebec – The province of Quebec currently has the most rigorous regulations in Canada. Quebec governs the offering of financial planning services in Bill 188. Individuals holding themselves out as financial planners in Quebec or servicing Quebec residents must be authorized to do so by the Bureau des services financiers and use the title "financial planner" or "F. PL" only. This regulation came into effect in 2000.

Only advisors with IQPF qualifications can develop and present a full financial plan on their own for residents in Quebec.

Other Provinces & Territories – Although the regulator has not moved forward with it, “Multilateral Instrument 33-107 Proficiency Requirements for Registrants Holding Themselves out as Providing Financial Planning and Similar Advice” sets an interesting benchmark and Best Practice. Its principals have been echoed in some of the provincial securities commissions and insurance councils. Regulators are still motivated to arrive at some resolution to the issues that initiated MI 33-107 (see below), and some aspects of this will likely be incorpored into the Client Relationship Model.

“The objectives of MI 33-107 are to reduce clients' exposure to unnecessary losses resulting from incomplete and incompetent financial planning advice, and to ensure that dealers supervise their salespersons to ensure they are not holding themselves out as financial planners without the required proficiency.”

The proficiency standard basically says that someone must have:

• Passed the FPPE – Financial Planning Proficiency Exam or a recognized financial planning course of study;
• Have 2 years of insurance or securities industry experience in the past 5 years;
• Be committed to an approved continuing education program.

Within the restricted titles are the words financial planner or documents with the words “financial plan”, but also any combinations of: “financial”, “retirement”, “wealth”, “security”, “asset” or “money” and “adviser”, “advisor”, “consultant”, “specialist”, “expert”, “manager” or “counsellor”.

If we look at the Insurance Regulators, under the Saskatchewan Life Insurance Council Bylaws Section 13 (c) Duties of Licence and numerous other references in the regulation, an advisor cannot hold themselves out as a financial planner unless they hold a CH.F.C., a CFP, a RFP or a CLU and is enrolled to get a planning degree recognized by the FPSC.

[1]

If we do a similar exercise in BC, under the rules of the Insurance Council of BC it states that an insurance licenced representative cannot hold themselves out as a financial planner unless they hold a CLU, CH.F.C., a CFP, a RFP or IQFP (Quebec) or another designation recognized by the Financial Planning Standards Council.

[2]

Summary

• In Quebec you must be authorized by the Bureau des services financiers and use the title "financial planner".
• In the rest of Canada PlanPlus would recommend a corporate policy where advisors should not hold themselves out as financial planners unless they hold a recognized planning certification like the CFP, RFP, PFP or IQFP. In the absence of something like the Financial Planning Proficiency Exam, firms should have representatives seeking exceptions to demonstrate compliance with specific provincial regulations (insurance and securities) and a commitment to continuing education in the planning field.

What are the responsibilities of the sponsoring firms?

The two major investment channels in Canada are the Investment Dealers Association (IDA) that oversees the more regulated sale of stocks, bonds, etc and the Mutual Fund Dealers Association (MFDA).

IROC – According to Member Regulation 0239 of the IDA, “The Association has concluded that financial planning is a securities-related business in that the nature and extent of any investment recommendations to a client are inextricably tied to the overall plan. While it is possible for a financial plan to generate no investment recommendations, such plans are likely to prove the exception rather than the rule.

Members are therefore responsible for supervision of the financial planning activities of their agents and employees and the attendant record keeping.”

Further, in Member Regulation 0241 “The same supervision requirements apply with regard to employees who engage in financial planning as to agents.”

MFDA – The CSA agrees to support the MFDA position that salespersons can record income derived from their financial planning activities through businesses that are otherwise regulated; however, any part of financial planning that could be considered advice relating to trading in securities or acts in furtherance of a trade must be supervised by their dealers.

It is required that “the dealers have a system in place to review and monitor the financial planning activities of their salespersons, which includes a review of the whole financial plan, to ensure all conflicts of interest are addressed properly and all advice and trades in securities for clients are suitable based on the clients investment objectives and needs.”

Life Insurance Agents – The same restrictions apply to titles and service descriptions used by licensed insurance agents and agencies. In Saskatchewan, the Life Insurance Council of Saskatchewan has had by-laws in place for several years, which impose proficiency standards on life agents who hold themselves as out as financial planners and under similar titles.

The Life Insurance Council will be amending these by-laws to make them parallel with the provisions in the Instrument (MI 33-107). However, the by-laws will not permit life licensees to hold themselves out using one of the restricted titles until they have completed either the FPPE or one of the alternate courses referred to above.

In BC, according to the Insurance Council of BC, “Where a licensed corporation, partnership or sole proprietorship (“agency”) is involved, Council requires that either the sole proprietor or nominee meet the requirements in this notice before the agency holds itself out as providing financial planning. Individual agents employed by the agency who do not meet the requirements may not hold themselves out as a financial planner. Where the name of the agency or other form of publication would cause a member of the public to believe agency representatives are financial planners, then any licensee within the agency who does not meet the qualifications, should disclose to their clients that he or she is not qualified to conduct financial planning.”

Planning Outside the Firm – In many cases agents may be multiply licenced (i.e. insurance and investments) with different firms or we may see IDA registered representatives who are operating within a broader organization like a credit union. The insurance regulators have been vocal that financial planning should not be forcibly regulated under the investment channel for cross-licenced advisors. The question arises what are the restrictions and responsibilities related to advisors with multiple “masters”.

• MFDA rules clearly recognize the alternative of the planning services being offered through other entities than the member firm.
• IDA rules (MR0239) seems more definitive that “financial planning is a securities-related business”, although MR0434 seems to provide more flexibility:
  • “Insurance products are not considered “securities”. Insurance activities when provided through an individual’s financial planning or other personal entity must be reported via NRD as a separate business activity.”
  • “The evolving complexity of the financial services industry calls for Members to become increasingly self-policing, and for regulators to favour a more principle based approach to their policy setting and enforcement activities.”

Requirements

• If planning is carried out through an entity other than the MFDA or IDA member, the must be aware of and approve the activity.
• They must identify the risk of client confusion and/or conflicts of interest and ensure appropriate supervision is in place.
• In respect to data sharing amongst affiliates, IDA MR0434 states, “that permission does not extend to business activities that are wholly outside the Member”.
• MR0434 states “Business activities “outside” the Member must be clearly seen to be outside the Member. Therefore the use of a Member’s premises, records, logos, trade name(s), stationary, support staff, contact facilities (mail/email/instant or text messaging addresses, etc.) should not be permitted.
• “No outside business activity which might cause consumer confusion …”

Summary

• In practice, an IDA firm appears responsible “for supervision of the financial planning activities”. Although it may be possible to have planning services delivered through other channels it would appear to do so requires the client relationship to be primarily through the other entity and the IDA services to be secondary to the relationship to avoid confusion.
• An MFDA firm can elect to have planning delivered through them or allow the representative to deliver these services through another entity.
• A dual licenced (MFDA & Insurance) representative must deliver financial planning through one of these or “another entity that is regulated by a government authority or statutory agency or subject to the rules and regulations of a widely recognized professional association”.
• Where services are provided through an entity other than the member, the member should ensure no possibility of customer confusion by avoiding use of logos and trade name(s), etc. A clear disclosure should be included in the engagement process.
• The member maintains a responsibility to “monitor their salespersons” in any circumstance. This may include access to plans and representations, although no direct responsibility for monitoring the plans is necessitated.

Who can develop and deliver a financial plan?

This is probably one of the most ambiguous questions to answer. When we look at the six steps of the financial planning process, many aspects of the process can be and should be delegated by the financial planner to staff in order to provide a cost effective service, or possibly to other experts where additional knowledge and skills are required:

1. Engagement
2. Discovery
3. Develop the plan
4. Present the plan
5. Implement the plan
6. Monitor and review

Where we need to focus to get more clarity on this question is the Code of Ethics for Financial Planners. Although there may be minor differences, we will look at the “Principles from the CFP™ Code of Ethics”, with a particular focus on the area of Diligence.

• PRINCIPLE 2: OBJECTIVITY - A CFP professional shall be objective in providing financial planning to clients.
• PRINCIPLE 3: COMPETENCE - A CFP professional shall provide financial planning to clients competently and maintain the necessary competence and knowledge to continue to do so in those areas in which the CFP professional is engaged.
• PRINCIPLE 4: FAIRNESS - A CFP professional shall perform financial planning in a manner that is fair and reasonable to clients, principals, partners and employers, and shall disclose conflicts of interest in providing such services.
• PRINCIPLE 5: CONFIDENTIALITY - A CFP professional shall maintain confidentiality of all client information.
• PRINCIPLE 6: PROFESSIONALISM - A CFP professional’s conduct in all matters shall reflect credit upon the profession.
• PRINCIPLE 7: DILIGENCE - A CFP professional shall act diligently in providing financial planning.
  • Rule 701 requires CFP professionals to enter into a client engagement only after securing sufficient information to be satisfied that the relationship is warranted by the individual’s needs and objectives, and that CFP professionals have the ability to either provide the requisite competent services or to involve and supervise other professionals who can provide such services.
  • Rule 702 requires CFP professionals to make and/or implement only those recommendations that are suitable for the client.
  • Rule 703 states that consistent with the nature and scope of the engagement, CFP professionals shall carry out a reasonable investigation regarding the financial products recommended to clients. Such an investigation may be made by the CFP professional or by others provided the CFP professional acts reasonably in relying upon such investigation.
  • Rule 705 requires CFP professionals to properly supervise subordinates with regard to their delivery of financial planning, and states that CFP professionals shall not accept or condone conduct in violation of this Code.

Ultimately the financial planner is responsible for all aspects of the engagement, from the initial investigation to ensure it is appropriate through to the delivery of the plan. If for business reasons, some aspects of the process are delegated to others, the planner remains responsible.

Based on information on the FPSB web site, in reference to a CFP who is not licenced with the province of Quebec, “Without the IQPF qualifications, an advisor would have to have the full financial plan reviewed and approved by an IQPF Designate and the Designate would have to participate (in person or by telephone) in the presentation to the client.” This example assumes the plan itself is done by the CFP. The key differentiator here is that Quebec operates under Civil law compared to Common law. This is no different than the fact a CFP in Canada cannot develop and deliver a plan to a US client unless that write a US exam, maintain membership in and continuing education with planning associations in both countries.

Outside of this reference, there do not appear to be restrictions on which aspects of the process are delegated to others so long as it does not compromise the ethical responsibilities of the planner to the client. It is the responsibility of the sponsoring firm or the CFP to ensure that processes implemented support these principals with full and complete disclosure to the client. In practice, collaborative planning with a financial planner and non-planning advisor could be support by either establishing a “team” with a financial planner in your branch or with a head office financial planner.

Principles of Client Care

In February 2007 the Canadian Council of Insurance Regulators (CCIR) after public consultations, agreed on three principles as best practices in managing actual or potential conflicts of interest.

The principles are:

• Client’s interests come first: Agents and brokers must put the interests of policyholders and purchasers ahead of their own;
• Make clear any conflicts or potential conflicts of interest: The law requires that consumers know about any actual or potential conflict of interest that may affect a transaction or recommendation; and
• Ensure products are the right fit: Products recommended must meet the needs of the consumer.

At the present time (March 2007) the CSA is looking for comments on “Proposed 31-103CP Registration Requirements”. Although the only references to Financial Planning are found in the “Referral Arrangements” section, again general principals state:

• “a client expects advice that is in the client’s best interest and is not influenced by the referrer’s own financial interest.”

Summary of Best Practice & Regulatory Standards

• Firms need to explicitly disclose the levels of service they provide in engagement agreements so a client understands if the are receiving financial planning services or a more basic level of advice.
• Firms should provide guidelines to help advisors and clients understand when the specific complexity of a case warrants financial planning services. This is an ethical responsibility of a financial planner.
• A designated planner should always undertake financial planning services. Firms should have clear guidelines that outline when an advisor can hold themselves out as a financial planner.
• If a non-planner works in collaboration with a financial planner in the delivery of financial planning services to clients:
  • It must be clearly disclosed to the client the respective roles of each;
  • The planner must remain responsible for the engagement.
• Separate fees charged to a client should be for “financial planning services” – not generic advice.
• Firms must supervise the advisory activities of their advisors with access to the records and plans generated.

Factor	Financial Advice	Financial Planning
Process	May be event driven although process remains a best practice	6 Steps of financial planning
Engagement	Engagement is a best practice but should disclose this is not a financial planning engagement	Mandatory part of financial planning standards
Fees	Should not charge fees for advice	Fees for advice constitute a clear planning engagement. Engagement for planning services can be without separate fees. Alternate forms of compensation should be disclosed.
Complexity & Integration	Modular calculators Needs analysis	Integration of complex multiple goals and the 6 areas of Financial Management, Asset Management, Risk Management, Tax Planning, Retirement Planning and Estate Planning.
Designations	None required	CFP® PFP RFP Pl.Fin.or competency as outlined in the FPSC “CFP® Professional Competency Profile”.

APPENDICES

(Appendix 1) FINANCIAL PLANNERS STANDARDS COUNCIL AND THE CFP DESIGNATION

FINANCIAL PLANNING

Definition

FPSC defines Financial Planning as “the process of creating strategies, considering all relevant aspects of a client’s financial situation, to manage one’ s financial affairs to meet life goals”.

Financial planners provide a wide breadth of financial expertise to clients, and may also have specialized knowledge in one or more specific components of Financial Planning. Fundamental to the Financial Planning profession is the integration of competencies and knowledge across all Financial Planning Components. The ability to identify interrelationships among the various components of Financial Planning represents the ‘added value’ of Financial Planning and distinguishes a financial planner from other financial professionals. While other financial professionals may offer services that fall within a subset of the Financial Planning domain, they have not necessarily been trained, nor are they necessarily qualified, in all components of Financial Planning or in the integration of these components.

Financial planners also often have other roles. For example, many accountants also hold the CFP designation. Similarly, other financial professionals who earn much of their living as mutual fund or insurance advisors may also hold the CFP designation to better serve their clients’ needs, and to extend their service offering to include Financial Planning. For many financial professionals, Financial Planning represents only an aspect of their job, rather than their primary function. In any case, critical to FPSC is that, regardless of the quantity of time spent providing Financial Planning, CFP professionals should always conduct themselves in accordance with the Code of Ethics and Practice Standards as applicable.

For clients, CFP professionals provide strategies and advice on a countless number of objectives. For example, some clients may be focused on how to prepare for retirement, others on how to save for a down payment on a house, or others on how to ensure sufficient funds are left to a dependent child. Sometimes, the CFP professional may need to refer the client to a specialist (such as a lawyer or licensed securities dealer).

Often, the CFP professional will also have specialized knowledge in a particular area that goes beyond the scope of Financial Planning. For example, many CFP professionals are also fully licensed securities or insurance representatives, and others hold professional accounting designations. Regardless of the client’s specific need, the CFP professional should always consider all aspects of the client’s financial situation in formulating strategies and making recommendations, and should always follow these Practice Standards to the extent that they apply to any given situation. For example, a CFP professional cannot simply provide advice on life insurance without also considering the client’s current asset holdings, family income requirements, the existence of a will or other family issues.

Components of a Financial Plan

Financial Planning consists of six fundamental components – Financial Management, Tax Planning, Asset Management, Risk Management, Retirement Planning and Estate Planning. These are all defined in the appendix of this document.

What is the Difference Between Financial Planning And Financial Advice? With Financial Planning, none of the above components are ever dealt with entirely in isolation – it is the integration and interdependencies among these components, as well as the need to analyze and synthesize information presented to formulate strategies, which distinguish Financial Planning from other forms of financial advice or financial intermediation.

www.cfp-ca.org/licensees/licensees_competencyprofile.asp

(Appendix 2) MFDA Financial Planning

The draft MFDA Rules would allow salespersons to continue to conduct financial planning activities through a business outside of the dealer, provided that the business is regulated by any governmental authority or statutory agency other than a securities commission. This differs from the position taken in the CSA Distribution Structures Position Paper, which states that financial planning activities must be conducted through and supervised by the mutual fund dealers. The CSA agrees to support the MFDA position that salespersons can record income derived from their financial planning activities through businesses that are otherwise regulated; however, any part of financial planning that could be considered advice relating to trading in securities or acts in furtherance of a trade must be supervised by their dealers. This will require amendments to be made to the draft MFDA Rules to ensure that:

1. ) the dealers are notified of and approve the financial planning activities of their salespersons;
2. ) the dealers have access to the complete financial plans prepared by their salespersons that have resulted in advice or trades in securities;
3. ) the dealers have a system in place to review and monitor the financial planning activities of their salespersons, which includes a review of the whole financial plans, to ensure all conflicts of interest are addressed properly and all advice and trades in securities for clients are suitable based on the clients investment objectives and needs;
4. ) the dealers have the ability to follow up and investigate any client complaints with respect to financial planning provided by their salespersons;
5. ) disclosure is provided to financial planning clients that clarifies the relationship between the salesperson and the dealer with respect to these activities and that provides guidance to clients with respect to complaint procedures; and
6. ) the MFDA and the securities regulators have access to and the ability to review the whole of these financial plans and have the ability to follow up complaints, and investigate and regulate those activities that result in trades and advice in securities.

In some provinces, salespersons who offer financial planning advice will be required to comply with Multi-Lateral Instrument 33-107 ("MI 33-107") when it becomes effective. The objectives of MI 33-107 are to reduce clients' exposure to unnecessary losses resulting from incomplete and incompetent financial planning advice, and to ensure that dealers supervise their salespersons to ensure they are not holding themselves out as financial planners without the required proficiency.

www.mfda.ca/regulation/notices/MR-0009.pdf

www.mfda.ca/regulation/rules/Rules02-27-06.pdf (see section 1.2.1 (d) (vii) Dual Occupations – Financial Planning)

(Appendix 3) BCSC - For Financial Planners

Holding Out and Titles

It is the responsibility of the registrant firm and those representatives at the firm who hold themselves out as a “financial planner" to ensure they have proper proficiency in financial planning. As noted in BCP 31-601(s. 4.6), communications with the public should leave no uncertainty as to the dealer or representative proficiency. This means that the descriptions and titles used on the registrants signs, business cards and in advertising should not mislead the public about the proficiency and qualifications of the representative providing services or advise.

To comply with this policy, the firm should have proper procedures outlining the business names, styles, salesperson qualifications and business titles that can be used at that dealer or advising firm. The firm needs to ensure that all representatives have been given the guidelines and should take steps to institute an effective compliance program that will detect when representatives at the firm are offside. To be effective the firm’s policies also need to be enforced.

Section 1.2.1(e) of the MFDA Rules state that no approved person shall hold him or herself out to the public in any manner including, without limitation, by the use of any business name or designation of qualifications or professional experience that deceives or misleads the public, a client or any other person as to the proficiency or qualifications of the Approved Person under the Rules or any applicable legislation.

Financial Planning Qualifications

Any representative that wishes to hold himself out as a “Financial Planner” or advertise that he or she provides financial planning services must be licensed by the Financial Planners Standards Council of Canada. If the representative is not licensed by this body, but has one of the qualifications below, then that person may hold himself out as a financial planner:

• Association for Investment Management and Research
• CFA
• Chartered Financial Analyst
• Canadian Association of Financial Planners RFP
• Canadian Institute of Chartered Life Underwriters and Chartered Financial Consultants
• CLU
• Canadian Institute of Financial Planning Chartered Financial Planner
• Canadian Securities Institute (or fellow of the CSI) Professional Financial Planning Course
• Certified General Accountants Association of British Columbia or of the Canadian province or territory in which the applicant is resident
• CGA Certified General Accountant
• Certified Management Accountants Society of British Columbia or of the Canadian province or territory in which the applicant is resident
• CMA Certified Mgmt Accountant
• Institute of Canadian Bankers P.F.P.
• Institute of Chartered Accountants of British Columbia
• CA Chartered Accountant

These requirements are minimum requirements and are subject to change. If the representative has other qualifications not included above, they may only be eligible by applying to the Executive Director for approval, on a case-by-case basis. What would not be acceptable is where an individual has participated in a seminar and taken a financial planning course, but has not completed all the courses in a program of study. Partial completion of a program does not entail you have successfully completed a designation.

Fee for Service

If the individual intends to provide financial planning services on a fee-for-service basis, the individual must also:

• satisfy the Executive Director that the individual has "errors and omissions" insurance for a minimum of $1,000,000 coverage
• file, as part of the individual’s application for registration, a copy of a client disclosure statement that discloses: the name(s) of the company or companies through which the individual will provide clients with financial planning services and the name(s) of the registered dealer(s) or adviser(s) through which the individual holds her or his registration under the Act
• the means by which the financial planner generates income, including a schedule of fees
• that the client is entitled to go elsewhere to implement any plan that the financial planner prepares for the client
• if the client wishes the financial planner to implement a plan, that the client will become a client of the registered dealer through which the financial planner holds her or his registration under the Act, and that the financial planner will receive commissions from the registered dealer as a result of the implementation of the plan
• if the financial planner receives any commissions or referral fees, disclosure in accordance with statutory requirements (see section 3.3 of this policy statement)
• if the individual is also registered as an insurance salesman or agent under the Financial Institutions Act, R.S.B.C. 1996, c.141, that any insurance products sold by the individual to the client will also generate commissions to the financial planner
• the individual’s category of registration under the Act and Rules, and other licenses, if any, held by the individual, including licenses under the Financial Institutions Act, R.S.B.C. 1996, c. 141, and the Real Estate Act, R.S. B.C. 1996, c. 397 undertake to provide clients with a copy of the disclosure statement described above send the disclosure statement described above to each client annually and whenever there is a change in the circumstances that are required to be disclosed
• file a copy of the disclosure statement described above with the Executive Director, whenever there is a change in the circumstances that are required to be disclosed, and file, as part of the person’s application for registration, a copy of the business cards and letterhead that the person proposes to use [Act s. 34(2) ].

For further information review BC Policy 31-601, Part 4.6. © BC Securities Commission 2004 HOME SITE MAP LEGAL CONTACT US [3] (3 of 3)11/8/2006 8:44:47 AM

(Appendix 4) Alberta Securities Commission

The Alberta Securities Commission has taken the position that registered sales representatives could not charge a fee for financial planning. With a self-regulatory organization with adequate resources devoted to compliance to address their concerns, they will not object to a registered sales representative receiving a fee for financial planning provided that:

• The dealer is a member of the Mutual Fund Dealers Association of Canada;
• The dealer is aware the sales representative is providing the service and does not object. It is up the each dealer to decide whether to permit its sales representatives to carry out fee-based planning;
• The dealer has access to the financial plans prepared by the sales representative for clients;
• If the service representative is being provided by the dealer, the dealer must supervise the sales representative with respect to this activity and all compensation must be paid through the dealer;
• If the service is not being provided by the dealer, the sales representative must provide the service through another entity that is regulated by a government authority or statutory agency or subject to the rules and regulations of a widely-recognized professional association, pursuant to the Mutual Fund Dealers Association Rules 1.2.1(d). In addition the sales representative must provide disclosure to the client in writing that:
  • the dealer is not providing the fee-based planning service;
  • the dealer will not be supervising the sales representative who is providing the financial planning service and the client should not rely on the dealer for any review of the service; and
  • the dealer will not be liable to the client for any errors or omissions.