Kevin Wark had little time in late 2011 to settle into his new role as president of the Conference for Advanced Life Underwriting (CALU) before plunging into a pile of government submissions, consultations and in-depth legislative analysis. Now, almost two years in the position, the veteran of the insurance sector continues to have his hands full with key regulatory changes, including updates that could disrupt major financial planning strategies used by CALU’s members across the country.
But Wark, who started his career as a tax lawyer, says he welcomes the opportunity to play a key role in shaping the evolving legislative framework that is likely to affect the intersection of tax planning and insurance for years to come.
“I’ve always been in a planning role, trying to figure out how I apply this tax legislation to this situation and plan around it,” says Wark, 56. “Now, going into tax policy, it’s about what is the government trying to accomplish, and how [to] work co-operatively with the government to help them accomplish what they want to accomplish without hurting the underlying concepts.”
Wark’s leadership of CALU also comes at a turning point in the history of the 22-year-old organization, which began its existence as a division of Advocis. Wark has been CALU’s president since it became an independent entity, although it remains affiliated with Advocis. CALU continues to focus on issues such as tax-assisted savings strategies, capital-accumulation plans, the deductibility of interest and charitable donations of life insurance.
With the ever-increasing complexity of these and related topics, CALU’s board had decided it could be more effective by becoming independent. “We at CALU have the luxury of being very tightly focused on what we do,” Wark says. “Advocis has a much broader mandate.”
One current, particular focus is the changes to the life insurance policy “exemption test” proposed in the 2012 federal budget. The current rules, which set limits on the amount of cash that can be held inside a life insurance policy on a tax-deferred basis, date from 1982. “The sector had developed new products,” says Wark. “There were new applications for products. And the rules were kind of creaky and left room for interpretation.”
Indeed, Wark jumped at the opportunity to participate in the consultation process. “It’s a tremendous opportunity,” he says, “to be involved in a legislative initiative that only happens every 30 years.”
Under the proposed changes, the rules will be made more specific and the assumptions used to calculate amounts that can be accumulated inside life insurance policies will be modified. The government’s goal is to reduce the use of insurance policies to shelter investment income, a strategy that has grown in popularity in recent years.
CALU has provided extensive feedback on the government’s proposals, Wark says, and the government generally has been receptive. “We believe that they’ve been listening to the sector,” he says, “and that their desire is to get the rules correct and do so in a way that doesn’t seriously impact the marketing of insurance within Canada and its viability as a risk-management tool.”
Once the legislation is finalized, Wark expects that CALU will spend two to three months reviewing it and educating CALU members on the implications.
Other policy changes currently top of mind for CALU include proposals in the 2013 federal budget related to two sophisticated insurance-based planning strategies: so-called “10/8” arrangements (see Investment Executive, April 2013) and leveraged insured annuities. Both arrangements, which have been popular among high net-worth clients, involve using loans and life insurance policies to create tax advantages for policyholders.
The government has proposed changes to eliminate what it says are “unintended tax benefits” associated with both strategies. This move has caused concern among CALU members, particularly those with clients who have the 10/8 arrangements in place. “It does affect in-force policyholders,” says Wark. “They will need to restructure in some way.”
Wark, a vocal proponent of 10/8s, has been in discussions with the Department of Finance Canada since the budget was released, providing feedback on the proposals. Specifically, Wark is concerned that the proposals regarding 10/8s don’t leave enough time for individuals who currently have such arrangements in place to unwind them and modify their financial plans to accommodate the coming changes. Says Wark: “We want to make sure that people don’t have to make quick decisions that will impact long-term planning.”
Wark’s background is in tax and estate planning and insurance. After earning his law degree from the University of Western Ontario, Wark articled and practised at Stikeman Elliott LLP in Toronto, where he gained experience in the firm’s tax planning unit.
Wark then was hired as a tax and estate lawyer for Toronto-based Manulife Financial Corp. He later became head of that firm’s tax and estate planning department.
Following 10 years with Manulife, Wark joined the now-defunct Toronto-based Equinox Financial Group Inc., one of the first national managing general agencies in Canada, where he became president and CEO.
In 2005, Wark took on the position of senior vice president of business development with Toronto-based PPI Financial Group Inc. That firm had long interested Wark, given its heavy focus on tax and estate planning.
So, when CALU’s board decided in 2011 to hire its first president to handle the organization’s day-to-day operations, Wark was an obvious candidate. He has been an active member of CALU since its inception, as well as having served as the organization’s chairman of tax policy. Wark also is a member of Advocis, of the Canadian Bar Association and of the Society of Trust and Estate Practitioners.
Wark urges advisors to get involved, in a manner similar to the way he has – especially given the high volume of regulatory changes underway. He points out that in order to be effective, such organizations must develop a critical mass of active participants. “The groups that are trying to influence things,” he says, “will only be effective if there are a number of people contributing. It’s important for advisors to understand that their well-being and profession are at risk if they aren’t supporting what’s happening.”
CALU’s total membership is capped at 755, and is made up of three tiers of members: active members, who are client-facing advisors; associate members, who are professionals in roles supporting advisors; and provisional members, who are newer to the insurance sector. Members must meet certain qualifications, including taking an active role in CALU’s government relations mandate. “[CALU members] have to demonstrate they are prepared to play a role,” says Wark, “in either meeting regularly with their own MP or contributing in some way to our government relations focus.”
Overall, Wark is seeing growing interest in CALU – and in advanced planning generally. He suspects it’s being fuelled by the aging population – and the looming transfer of wealth: “I think the demographics are very much driving more sophisticated planning to help people determine the best way to pass on wealth while minimizing taxes and other exposures.”
Wark was born in Mississauga, Ont., and raised in Toronto – where he currently resides. He spends much of his time outside of work travelling with his wife and staying active through yoga, golfing and running.
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