Commission disclosure does not stop conflicts of interest: Advocis

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A reply to Newfoundland’s “Principles of the Sale of Insurance”

January 25, 2007, Toronto, ON – Advocis, The Financial Advisors Association of Canada, today issued the following statement on the release of Principles of the Sale of Insurance by the government of Newfoundland and Labrador:

Advocis applauds efforts to provide meaningful information and protection to consumers. Advocis advisors, as a matter of fact, are already required as a condition of membership to put their clients’ interests first. And we have played a key role working with Canadian insurance regulators and other stakeholders in developing product suitability guidelines and tools to mitigate and disclose potential conflicts of interests.

We note, however, that Newfoundland and Labrador is the only province proceeding with commission disclosure. Insurance regulators across Canadian have reviewed commission disclosure and discounted its usefulness. The only reason stated for commission disclosure is to address concerns about conflicts of interests – no evidence of which has been found by Canadian insurance regulators in the life and health sector. Commission disclosure does not in any way:

  • provide meaningful information or protection to the consumer concerning the possibility of a conflict between the insurer and the intermediary;
  • the relationship between advisor and insurer;
  • the advisors’ previous transactions; or
  • the relationship the advisor has with other insurers or the range of products offered

We support meaningful disclosure that actually informs the consumer. In this case, that means disclosure which fully informs the consumer about all aspects of his or her relationship with an insurer that may create or give the appearance of a conflict of interest. As mentioned above, this is precisely what Advocis has done, working in close concert with regulators. We have developed for our members a Conflict of Interest Disclosure and Product Suitability tool which requires the advisor to disclose, among other things:

  • the insurers he or she represents and for what products;
  • whether an advisor has an exclusive arrangement with an insurer;
  • the products the advisor has recently sold; and
  • the per cent of those products where manufactured by which insurer.

In other words, it provides comprehensive and meaningful disclosure, the kind that will allow the consumer to make an informed decision. This is how Advocis lives up to its responsibility to protect the consumer while enhancing the professionalism of the advisor.

And this brings us to the next point. We believe professionalism means just that – professionalism. Designations supported by codes of conduct, appropriate practice standards, advisor errors and omission insurance and meaningful continuing education along with self regulation of financial planning is a better route that an attempt to impose ethics through a rule which may sound comforting but, in fact, has no meaning.

We place the priority of the consumer’s interest at the centre of its mandate. And we will continue to uphold that mandate through meaningful solutions that work.

About Advocis

Advocis is a national professional association that prepares, promotes and protects financial advisors in the public interest. We do this by providing a professional platform including career support, designations, best practices direction, education, timely information and professional liability insurance. This strengthens the relationship of trust and respect between financial advisors and their clients, the public and government. The Association’s website is