1. Documenting sales rationale March 2018
Compliance Days presentation
Goal to make brokers aware of compliance changes/updates – which will likely require some work on your part over the next week, perhaps longer…
Earleen Moulton
VP Compliance, BridgeForce Financial Group

2. FSCO expectations
“All licensed life insurance agents must meet their legal requirements under the Insurance Act, as well as the regulations and obligations under FINTRAC and PIPEDA. FSCO encourages licensed life agents to visit the insurance pages on FSCO’s website in order to learn more about their legal obligations. 
In addition, adherence to industry best practices is also critical to ensuring consumer protection. Life agents are expected to be familiar with CLHIA best practices, and apply them to their day-to-day operations. If FSCO observes a general failure to follow industry best practices, FSCO’s Superintendent may consider it appropriate to make recommendations to the government to incorporate them into regulations. “

4. Why document the rationale
For the Advisor:
Confirm facts
Verify the direction received from the client
Identify needs that the product meets and needs left uninsured
Document that the sale is suitable
Substantiate the client’s understanding of the sale
For the Client:
Check accuracy
Review that the product meets their needs
Review any gaps in coverage
Review the reason for the advisors recommendation
Contact their advisor if something is incorrect or forgotten
Documentation about why a particular product was purchased
The purpose of the reason why letter is to be a final check by the advisor that the sale is suitable to the clients needs. For the client it is a condensed written version of the rationale for their purchase.
For the advisor it a final check to:
Confirm the facts;
Verify the direction received from the client;
Indentify the need that the product meets, and needs that are left uninsured;
Document that a suitable sale was made;
and, substantiate the client's understanding
For the client this letter:
is an opportunity to check that the transaction is what they want
review that the insurance product meets their needs
review any gaps an advisor has identified in their insurance coverage
review the advisors reason for the recommendation
it is also a reminder to contact the advisor if something is incorrect or forgotten
and lastly, this documentation serves as a reminder to the client about why a particular product was purchased

5. What to include Your documentation should include/identify:
Product being purchased
Type of insurance, the carrier, and product name
Key facts determined during Fact Finding (“as we discussed… you indicated”)
Needs, as well as gaps in coverage identified
Plans to follow-up on unmet needs
How and why the product is suitable (“because… in order to… so that”)
Overall, each reason why letter is meant to be brief summary of the transaction with a focus on understandability.
The letter should:
Identify what insurance product is being purchased
The type of insurance, the carrier, and brand-name
The key facts that have lead to the advisor making their recommendation
What specific needs are being addressed, and any needs that the client has decided to not insure against...
When providing this explanation include the specific amount of coverage purchased and the value of any coverage the client still needs
A plan to follow-up on unmet needs should also be incorporated into the letter
If an IVIC was purchased the discretionary fee choices selected should be included.
Advisors that already send letters summarizing the circumstance around a transaction don’t need to change the letters if the required content is included. If a Life Insurance Replacement Disclosure (LIRD) has already been sent, an additional reason why letter is unneeded.
Where an IVIC is sold there is a paragraph that describes the suitability of the fee structure
And each example ends with a reminder for the client to contact the advisor if there are any inaccuracies

6. Timing Provide your documentation or ‘reason why’ letter:
No later than the date of policy delivery
Paper or electronic
After each transaction
* Always retain a copy of the letter in the client file
* Clients should also be encouraged to keep copies of these letters for their own purposes
The letter should be sent to the client before the client receives the policy.
These letters can be sent via , but only with the clients consent.
A reason why letter should always be sent to confirm that the advisor and the client understand each other regarding the transaction, even if the advisor was just taking an order from the client.
A draft of should be kept in the client’s file.
This extra layer of confirmation protects the client, and the advisor, by reinforcing sales suitability.

7. Conclusion A properly constructed reason why letter:
Confirms and documents that a suitable sale has been made
Reminds the client about which of their needs they have insured and where they may still need insurance
Summarizes the facts and details surround a transaction in a manner that is easy for a client to understand
In conclusion the use of a reason-why letter supports efforts to engage in needs based selling.
Sending a reason why letter helps to:
Confirm and document that a suitable sale has been made
Remind the client about which of their needs they have insured, and where they may still need insurance
And summarize the facts and details that surround a transaction in a manner that is easy for a client to understand
In closing, it completes the process of completing a suitable sale.

8. More Information
Find the CLHIA Reference Document: “THE APPROACH: SERVING THE CLIENT THROUGH NEEDS- BASED SALES PRACTICES” at: BridgeForce Compliance page, see ‘Needs bases sales’

10. Specific to seg funds
You’re expected to be able to demonstrate product suitability, or a needs based sales process for seg funds too!
Advisors must understand the features of seg funds & how it fits with the client needs, in order to include it in a suitable product recommendation.
“The task of the advisor is to identify the financial needs of the consumer to ensure the IVIC product is suitable for them in light of their particular circumstances and then assist the consumer in understanding how the product meets his or her financial needs.”

11. Questions? Have you updated your sales process –
for the Reason Why letters
Disclosure – now 7 steps; BFG template updated
CAILBA 2017