Page 21 - Newcom

Beware of conflicts when
working with couples
professional development
Dealing with a request outside your joint engagement
by Michelle Schriver
the wife must find another advisor — which would
likely alert the husband to her lack of disclosure.
The quandary
Your clients are a married couple, and you’ve always met with them together. They have joint accounts and are each other’s benefici- aries on their regis- tered accounts. The wife, who is much younger than the husband, calls to tell you she has a substantial personal account that she’d like you to manage. How do you proceed?
The experts
To contribute your own ethical dilemmas or con- duct quandaries, please email Michelle Schriver at michelle@
Christine Van Cauwenberghe,
vice-president of tax and estate planning with IG Wealth Management in Winnipeg
he most important
Cindy Huang, portfolio manager with Leith Wheeler Investment Counsel
in Vancouver
P
spouses, I would proceed with caution because there is a potential conflict of interest. To ascertain whether a conflict exists, I would ask the wife about her investment objectives for these funds, the funds’ source, if she’s comfortable with her husband know- ing about this account and if not, why. If this personal account comes with a secrecy obligation, I wouldn’t accept the account due to the unresolvable conflict.
A potential exception is a non-registered account set up as an irrevocable trust — perhaps with the wife’s children from a previous marriage as benefici- aries. In such a case, the wife gives up legal owner- ship of the assets.
Depending on what I learn from the wife, there may be reason to look more carefully into the couple’s joint accounts to ensure there’s no malfeas-
ance — especially since the husband is much older.
I’d consider various fac- tors, including when the last know-your-client form was completed and what the form says about the wife’s income sources; changes
in the husband’s conduct, appearance or comprehen- sion at the last meeting; whether the husband has
a trusted contact person; changes to the couple’s account patterns, such as large withdrawals; and the potential for anti-money laundering issues.
If I suspected a conflict of interest, I would address my concerns with my com- pliance department. AE
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While joint engagement includes some confidenti- ality for each party, in prac- tice both parties are aware of their combined assets because the joint financial plan is reviewed at client meetings. If spouses don’t want to share information, it’s best they don’t enter into joint engagement.
In this scenario, you
must remind the client
about your obligations to both her and her spouse. To prevent misunderstandings before they occur, advis- ors should explain joint engagement when first meet- ing with clients, using sample scenarios: for example, explain that you can’t accept a confidential request by one spouse to remove the other spouse as the bene- ficiary of a TFSA.
You can also ask the wife why she wants a sep- arate account. She may have misconceptions about whether certain assets are shared in the case of separation or divorce, and you may be able to allay her concerns. If the funds are from an inheritance kept in a separate account since before marriage, for example, they likely won’t
be shared in a divorce.
If the wife remains firm that she wants to keep an account secret from her husband, you can repre- sent only the husband, and
thing to remember with joint engagement is that you have obligations to both parties. If one person asks you to do something privately, you must con- sider if it’s in the best inter- est of the other party or whether there’s a conflict.
ortfolio managers have a fiduciary duty to act
in a client’s best interest. As a fiduciary to both
newcom.ca .
ADVISOR.CA 21
When acting for two or more clients in a joint engagement,
a certified financial planner (CFP) should watch for conflicts of interest among the clients that may impact the CFP’s ability
to provide services, according to
FP Canada’s Standards of Professional Responsibility.
IIROC’s Dealer Member Rule 42 says approved persons must address conflicts in “a fair, equit- able and trans- parent manner, and consistent with the best interests of the client.”
MFDA rule 2.1.4 says conflicts must be addressed by “responsible business judgment influenced only by the best interests of the client.”