Following a consultation last year, FP Canada has updated its standards of professional responsibility with two new conduct rules related to trusted contacts and conflicts of interest, and with changes to its practice standards for financial planning.
One of the new rules, aimed at protecting vulnerable clients, requires financial planners to inform clients of the value of naming a trusted contact person (TCP) and to record, in writing, the client’s decision about naming a TCP.
FP Canada’s second new conduct rule prohibits financial planners from acting as an estate trustee, executor, power of attorney for property, or beneficiary for a client while also providing the client with financial planning services. Exemptions include “immediate family” (those connected by blood relationship, marriage or common-law partnership, or adoption), though the conflict must still be disclosed in writing.
The two measures reflect similar rules in the securities space. While securities rules are compliance-based, FP Canada as a professional oversight body regulates financial planners and their relationships with clients, said Damienne Lebrun-Reid, vice-president of standards, certification and enforcement with FP Canada.
The conflict of acting in roles such as power of attorney while also providing planning was “a driver” for the certification body as it made updates, Lebrun-Reid said. “We were seeing a concern with respect to estate matters that we wanted to address.”
Conflicts of interest, generally, accounted for 16% of allegations in investigations in 2022, according to the annual report of the FP Canada Standards Council. The only allegation accounting for a greater proportion of investigations was suitability, at 24%.
The report highlights a case of a financial planner being named executor and estate trustee for a client while providing financial planning services, without disclosing the conflict in writing. With the new rule, acting in all those capacities is now prohibited, outside the familial exceptions.
With regard to TCP, “it’s part of planning,” Lebrun-Reid said, and is a concept FP Canada has “long supported.”
FP Canada certificants already have access via an online portal to a “terms of engagement” tool, and an information-gathering form related to TCP, as well as associated clauses to create documentation, will be added to the portal in the summer, she said.
The certification body also introduced a new “monitor and review” practice standard so that clients’ financial plans align with their goals, needs and priorities. The practice standards as a whole were also updated for “relevance and clarity,” a release said.
The changes are effective on June 1.