Consistent guidelines needed to protect clients when agents transfer dealers

By The IJ Staff | December 02 2014 10:51AM

Dear Editor,

I have just changed dealers. What I have found out is that there is no consistency in how agents are treated. The dealers say we are there to protect the client and make sure they are looked after. The former dealer says that MFDA requires them to assign an agent to the files so trades, etc. could be completed at the client’s request.In my opinion and experience, the clients would be better serviced by the agent that is leaving. This is difficult because the agent leaving no longer has access electronically to his clients. The agent can still do redemptions by paper and then fax them into the fund company or life insurance company, but it is unsettling to the clients when we cannot show them where their money is. The clients are the reason for our jobs. Clients want to know where their money is and if it is safe. I feel that the client can have a lot of anxiety because of the way we as agents have to transition the book over to the new dealer. When transfer documents are received by the former dealer, there does not seem to be a specific time line that the account must be transferred to the new dealer. If there is, there is no sense of urgency.

In my case, the former dealer did not process the account transfers on a timely basis even though they had received and credited the clients’ accounts for the transfer fees. Some took as long as 30 days or more.

The dealers say that we own the business, but they try to keep as much of it as they can. I feel I was fortunate as my clients were not solicited immediately following my resignation, although there are no restrictions on when the former dealer can start calling the former agents’ clients. It was obvious to me that as agents, we have no ownership of our business because the agent leaving can have the commissions cut off immediately (or longer, depending on the contract agreement). In my case, the dealer cut the commissions off on the day I resigned, not 30 days after as I was told.

I feel the MFDA and FSCO should have policies in place that protect the client and the agent more. The dealer pays the MFDA fee based on our assets and collects part or all of their dealership fee from us. That being said, it is my understanding that we are not to contact the MFDA because we are not a member, the dealer is. As a result of this, the agents really do not have a voice to standardize the industry for the benefit of clients, agents and dealers.

Since there does not appear to be any definite guidelines set by the industry, I suggest the following:

- The transferring agent should receive all commissions for 120 days after resignation for the clients that have not been transferred. For example, the dealer retains 15 or 20% of gross commissions and the balance goes to the transferring agent.

- The transferring agent should have electronic access to his clients for 120 days in order to process redemptions and to produce statements for the client.

- The transferring agent should have 6 months to transfer his clients to the new dealer without having them solicited by the former dealer in any form.

- The transferring agent must send a letter to his clients before his resignation or within one week afterwards.

- The transferring agent should have at least a 120 day window to transition his clients and receive his percentage of commission.

On the segregated funds side of things, I found the process of changing MGAs to be somewhat similar. I thought the segregated fund commission was vested with the agent like other life insurance products, but the commissions were cut off after 30 days (not immediately like the mutual fund commission). I am not sure what the standard is for segregated funds commission or if there is one. Also the MGA must purchase the business from the previous MGA and negotiations can take a while for each MGA and insurance company to agree. In my case, it took upwards of three months to complete the transfer, even though the purchase cheque had been sent quite a bit earlier.

So why am I telling you this? Hopefully agents, Advocis, the Independent Financial Brokers of Canada, FSCO, the mutual fund companies, the insurance companies, and other manufacturers of products will band together to help get some standards in the industry. This would be in the best interest for the clients, the agents (who have the relationship with the clients), for the MGAs, and for the dealers.

Ray Black
Stratford, Ontario





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