IFB's comments on Public Consultation Draft of CCIR/CISRO Consolidated Segregated Funds Guidance.
April 8, 2025
Sarah O’Connor,
Senior Policy Manager
Canadian Council of Insurance Regulators
and
Peter Chung,
Policy Manager
Canadian Insurance Services Regulatory Organizations
National Regulatory Coordination Branch
25 Sheppard Avenue West, Suite 100
Toronto, Ontario M2N 6S6
Submitted via email: ccir-ccrra@fsrao.ca
RE: Public Consultation Draft of CCIR/CISRO Consolidated Segregated Funds Guidance
Independent Financial Brokers of Canada (IFB) is a national, not-for-profit association representing approximately 2,000 licensed professionals across Canada. Most IFB members are licensed as life/health insurance agents. Often, they earn additional licenses or accreditations which permit them to address the broader financial needs of today’s client. These can include securities/investments, mortgages, P&C insurance, deposit instruments, estate/tax services, and financial planning. IFB members must agree to adhere to IFB’s Code of Ethics and Standards of Professional Conduct as a condition of membership.
IFB appreciates the opportunity to provide its comments on Public Consultation Draft of CCIR/CISRO Consolidated Segregated Funds Guidance. The IFB supports the overall objective of the Guidance, which is to ensure the fair treatment of customers and to promote a strong and stable insurance industry. IFB has been pleased to participate in past CCIR/CISRO consultations on this topic over the course of the past several years.
Potential for confusion
We note that the Guidance uses the term "intermediary" to refer to both advisors and Managing General Agents/Agencies (“MGAs/AGAs”). This is confusing as each plays a different role in the sales and servicing of IVICs. Advisors are client-facing and provide advice and recommendations to clients, while MGAs/AGAs typically provide support and oversight to advisors. To group them together under a single identifier runs the risk of overlooking their distinct roles and the different implications that the guidance has for each.
For example, in Part 4 the Guidance addresses compensation structures and potential conflicts of interest for Intermediaries. The nature of these conflicts, however, differs significantly between client-facing advisors who receive commissions, and non-client-facing entities whose compensation models might be fee-based or involve overrides. In some instances, the Guidance is relevant only to client-facing advisors, as in the case of the ACB Compensation Option, rather than to MGAS, AGAs or TPAs.
Similarly, the Guidance emphasizes the importance of “Know Your Customer” information and suitability assessments. While these principles are crucial for client-facing advisors, their application to MGA/AGAs is less clear.
To address these potential misunderstandings, IFB suggests that the Guidance clearly distinguishes between client-facing advisors and non-client facing entities throughout the Guidance, using distinct terminology where appropriate. It may also be useful to develop separate sections within the Guidance that address the specific obligations and expectations for each. Sections relating to compensation, disclosure, recordkeeping and oversight, for example, could be tailored to the distinct roles and responsibilities of client-facing advisors and non-client-facing entities.
Leveraging and IVICs
The Guidance focuses heavily on leveraging. To better understand the frequency of leveraging in the sale of IVICs, we surveyed IFB members for whom segregated funds sales make up a part (and in some cases, all) of their business. The results indicate that among the independent financial professionals in our membership, 86.67% say that they rarely or never encounter leveraging in the sale of IVICs.
Leveraging is a complex and potentially risky strategy; however, we believe the Guidance should be proportionate to the risks involved with IVICs. Consequently, we believe that the extensive guidance on leveraging is over-emphasized in this Guidance given the low incidence of its use in the sale of segregated funds.
We suggest that the information relating to the risks of leveraging and information for client-facing intermediaries on best practices when a client borrows to invest may be more valuable as a standalone piece of guidance relating to insurance sales more generally.
Compensation Arrangement vs. Sales Charge
We note that in 2.3.2 Offering Alternative Sales Charge Options, and throughout the Guidance, the Advisor Chargeback option is referred to as a Sales Charge. We argue that the ACB is not a sales charge in that it has no impact on the client’s investment, but rather that it is a compensation arrangement between the insurer and a client-facing intermediary.
We agree that the client should have the choice to choose the option that best suits their needs, accompanied by a plain language explanation of the mechanics of each option and any potential impact on the client.
Conclusion
IFB believes that the proposed Guidance is a positive step towards ensuring the fair treatment of customers and promoting a strong and stable insurance industry. We believe that the Guidance could be further improved by addressing the concerns and recommendations outlined above.
IFB appreciates the opportunity to comment on the Public Consultation Draft of CCIR/CISRO Consolidated Segregated Funds Guidance and looks forward to working with the CCIR and CISRO to ensure that the final Guidance is clear, effective, and proportionate.
Should you wish to discuss this response further, please do not hesitate to contact the undersigned at allan@ifbc.ca.
Sincerely,
Nancy Allan
Per: Nancy Allan
Executive Director
T: 905.279.2727 Ext. 102
E: allan@ifbc.ca