CLHIA announces tweaks to advisor compensation disclosure guideline

The Canadian Life and Health Insurance Association is tweaking its approach to its compensation disclosure guideline, including a provision to allow advisors to deliver the information to clients.

After releasing the guideline in January, the CLHIA announced in February that it would be seeking feedback on a number of areas related to the guideline. While the full consultations haven’t yet taken place, the CLHIA hosted initial, in-person discussions with advisors in February and March and received a number of written submissions, according to Erica Hiemstra, the association’s assistant vice-president of distribution.

“Those had a number of ideas in terms of how you could have a more standard type of process or best practices across the industry and how the advisor could be appropriately involved in that and how you could have any necessary checks and balances in place to ensure that the disclosure is happening,” she says.

Read: CLHIA sheds more light on compensation disclosure guideline

“So we’re going to take all that feedback . . . [and] we’re going to look at what’s practical for an insurer, for an advisor to actually operationalize. But we think we need to do that in consultation with advisors.”

The changes include an extension to the guideline’s implementation until Jan. 1, 2020, but only for group benefits disclosure. For group retirement services, disclosure for new contracts will begin on Jan. 1, 2019.

Despite the changes, at least one advisor is still unhappy. “Wrong people, wrong place, wrong time,” says Dave Patriarche, president of Mainstay Insurance Brokerage Inc. and founder of Canadian Group Insurance Brokers Inc.

“The regulators should dive into this kind of stuff, not the suppliers.”

Among the concerns is the different treatment of advisors on the group retirement side. “They’re not going to be pleased,” says Patriarche.

Read: Compensation disclosure guideline making waves in benefits, retirement market

“It means there isn’t any time for real consultation . . . so they’re treating that as different than benefits, which I can’t imagine anyone is going to be happy about.”

Additional changes include allowing advisors to make the disclosures directly to employers and establishing a reasonable and appropriate materiality threshold for tracking and disclosing in-kind compensation.

Patriarche says he’s happy to see the CLHIA is recognizing that delivery is a key part of the process. However, what that delivery will actually look like will be part of the next stage of consultations, according to Hiemstra.

“The guideline does talk right now about it being a separate report from the insurer to the plan sponsor or the contract holder, but that’s as much as it says, so it’s not overly prescriptive in terms of whether it’s a written report, an electronic report, something the advisor delivers or the insurer delivers. Those are all the questions we want to answer.

Read: CLHIA launches cross-Canada sessions about compensation disclosure guideline

“Certainly, what we’ve heard from advisors is they would very much like to be a part of that process. A key driver in that process in terms of setting the timing . . . [is] they want to drive that process and we think that there’s lots of room for that to happen.”

The CLHIA has yet to provide details on how it will enforce the guideline. Since the association is voluntary, Hiemstra says it expects its members to comply with its guidelines as compliance requirements. “We don’t ask them to report to us,” she adds. “It’s expected that they’ll adopt them. I think this is one of those things that, once you have a practice like this out in the marketplace, it becomes an expectation that everybody is doing it.”

As for next steps, the CLHIA and its members will be undertaking consultations through an advisory group with participation from both advisors and insurers.