Get licensed if you
|Q||I have a post-graduate degree in finance, do I still have to complete the educational requirements for a license?|
|A||Yes. Each financial license has its own specific area of study that is recognized by regulators as the entry point.|
|Many financial advisors hold more than one license to allow them to broaden the services they can offer to clients. As an example, IFB members often are licensed to sell both life/health insurance and mutual funds. Some IFB members are licensed to sell other products like general (P&C) insurance, mortgages, or securities.
Some advisors choose to earn a professional designation, such as the CFP® (Certified Financial Planner), in addition to their license. This can provide the advisor with additional tools to help plan for the client’s longer-term goals.
|How to get started ?|
|You will need to meet the educational/proficiency requirements for the financial license you want.||You will need to apply for the license, and be approved by your provincial regulator, before conducting any business.|
|Before you get licensed, you must complete the appropriate course material and successfully pass the exams. We’ve summarized the main steps below, organized by type of license, to help you learn more. Please note this information is intended to be general guidance to get you started and assist in your research. Always check with your provincial regulator to ensure you have the most up-to-date information.|
If you previously had an arrangement with your employer that included E&O insurance, you will need to obtain coverage as an independent broker. Proof of valid professional liability insurance is a mandatory licensing requirement in most jurisdictions and required by the insurers and MGAs/dealers you will contract with.
|IFB offers corporate and individual E&O coverage specifically designed for independent advisors and at very attractive rates. Newly licensed advisors can receive a 50% discount on premiums in their first year of licensing. click here.|
To be licensed to sell life/health insurance, you must have a contract with at least one life insurance company. These days, most independent brokers place their life insurance business through an agency, often referred to as a Managing General Agency or MGA. Such agencies also have contracts with various insurers and can be helpful to you with administrative tasks and when you wish to offer a client a product with an insurer that you may not be directly contracted with.
The MGA will want to separately contract with you, as an individual broker. The contract will spell out what services they will provide you with, compensation arrangements and any requirements they may have to manage their business risks (such as proof of your license, errors and omission insurance, etc.). There is no regulatory requirement to place all your insurance business with a single MGA, and many IFB members contract with more than one MGA. However, some MGAs have adopted a contractual requirement to prevent agents from placing business through another MGA. The contract with the insurer and MGA will also cover what happens to the advisor’s book of business in the event of termination, or otherwise leaving the business.
|Before setting up as an independent, you may want to talk to several agencies to get a better sense of their specific requirements and approach to business.|
The Canadian Association of Independent Life Brokerage Agencies, or CAILBA, is the trade association for MGAs and has a list of members on their website. Note that not all MGAs or insurance agencies belong to CAILBA.
To sell securities or mutual funds, you must be licensed and registered as an Approved Person with a specific dealer. The dealer will be either a full service securities dealer and member of the Investment Industry Regulatory Association of Canada (IIROC) or a dealer limited to the sale of mutual funds and a member of the Mutual Fund Dealers Association (MFDA). You can find a list of the dealers they regulate on each of these regulator’s website. As a securities registrant, you are restricted to placing all your securities trades through a single dealer. There are also rules related to engaging in ‘outside’ business activities. As an example, selling life insurance is considered an outside business activity which you would need to disclose to your dealer and get its written approval.
If you are already with a dealer and wish to change dealers, you should be aware that moving your existing book of business to a new dealer can be difficult and time-consuming. Make sure you know how this process will work before you take action.
|Q||Can IFB provide me with a recommendation on which MGA, Insurance Company or Securities/Mutual Fund dealer I should contract with?|
|A||No. IFB is a professional association. IFB does not recommend specific firms.|
It’s important that independent brokers do not become isolated from the many regulatory requirements required of those who operate in the financial services industry. For example, independent life insurance brokers are required to maintain an Anti-Money Laundering/Terrorist Financing Compliance Regime. Independent brokers cannot be covered under a life insurance company’s compliance regime.
IFB provides workshops, compliance materials and tools to help its members with compliance. We also provide broker tip sheets and decode regulations so you know what you have to do to avoid regulatory penalties.
Many IFB members have set up personal corporations or have incorporated their businesses. The advantages (and disadvantages) of incorporating depend on various factors, including your tax situation and expected revenue.
IFB cannot provide you with advice on how best to set up your independent business. We recommend you seek out professional tax and legal advice to ensure you set up your business in the most effective manner.
Below are some links to help you research the various ownership options for an independent business.
Please note: These links are provided for information only, and IFB is not liable for the accuracy of information. Advisors should always obtain professional advice relevant to their own situation.
Want more information?
Browse through our website to learn more about us and why you should belong to an Association which believes in the independent broker. We have resources specifically designed to support independent advisors, like IFB CE Central which offers online accredited CE (many free for IFB members) and Coming Up Next which links advisors looking to buy or sell a book of business (with a free trial period), and affordable E&O Insurance.
Learn more about IFB by watching this short video: https://youtu.be/MBS3kp5VuNw
Why wait? Support independent distribution! Call us or fill out a membership application today.
Your IFB Membership gives you a seat at the table when policy decisions impacting
your business are discussed.