RBC: The Insurance Process

Table of Contents

Chapter 1: Agent Ethics		7
	Definition of “suitable”	7
	Adequate Communication Skills	8
	Investment Vehicles	9
	Why is Ethical Conduct Necessary?	9
	Is it Possible to Teach Ethical Behavior?	10
	What is the Scope of Ethics?	12
	What Does it Take to be a Moral Person?	13
	Providing Quality Work and Services	14
	Creating a Legacy	14
	Example #1	15
	Example #2	16
	Example #3	17
	Example #4	18
	What are our Responsibilities to Other Moral People?	18
	Required Continuing Education	20
	Compliance Manuals	21
	RBC Wealth Management Financial Services Compliance Manual	22
	1.  Introduction	22
	2.  Standards of Conduct	22
	2.1 Ethics;	22
	2.1.1. Priority of the Client’s Interests	22
	2.1.2. Compliance with the Law	23
	2.2 Conflicts of Interest	23
	2.3 Privacy	23
	2.4. Anti-Money Laundering	23
	2.5. Personal Dealings in Securities	23
	2.5.1. PRO Accounts	23
	2.5.2. Employee Trading in Royal Bank Securities	24
	2.6. Gifts and Entertainment	25
	2.7. Prohibited Activities	25
	2.7.1. Holding Out and Fronting	25
	2.7.2. Coercion and Undue Influence	26
	2.7.3. Rebating	26
	2.7.4. Tied Selling	27
	2.7.5. Misrepresentations	27
	2.7.6. Twisting and Churning	27
	2.7.7. Induced Lapse	27
	3. Registration and Licensing	28
	3.1. Insurance License	28
	3.2. Dual Licensing for Securities and Life Insurance	28
	3.3. Continuing Education Requirements	28
	3.4. Errors and Omissions Insurance	28
	3.5. Termination of a Life License for an IA	29
	3.6. Termination of Employment of an IA from RBC DS	29
	4. Scope of Business and Approved List of Insurance Suppliers	30
	4.1. Scope of Business	30
	4.2. Approved List	30
	4.3. Foreign Insurance Products	31
	4.4. Out-of-Province Clients	31
	4.5. Non-Resident Clients	31
	4.5.1. Sale of Insurance Products and Services	31
	4.5.2. Servicing of Insurance Products and Services	31
	5. Points of Sale Requirements	32
	5.1. Agent of Record for Insurance Applications	32
	5.2. Disclosure to Clients and Prospective Clients	32
	5.3. Know Your Client / Insurance (KYC)	33
	5.4. Policy Delivery	33
	5.5. Commissions	34
	5.5.1. Withholding of Commissions	34
	5.5.2. Non-Life Licensed Insurance Referral Program	34
	5.5.3. Additional Fees	35
	6. Servicing Requirements	35
	6.1. Updating Insurance KYC	35
	6.2. Replacement of Existing Life Insurance Contracts	35
	6.3. Remittance of Insurance Funds	37
	6.4. Policy Transfers	37
	6.4.1. Foreign Insurance Policies	37
	6.5. Attorney acting under a Power of Attorney Designating a                  beneficiary	37
	6.6. Limited Power of Attorney	38
	7. Record Retention	38
	Chart	38
	7.1. Separation of Records	40
	7.2. Cautionary Note on Destruction of Records	40
	7.3. Records Documenting Verbal Communications with Clients	40
	7.3.1. Information to be Documented	40
	4.3.2. Where to Document Verbal Communications with Clients	41
	8. Segregated Funds	41
	8.1. On-Book, Off-Book Transactions and Creditor Protection	41
	8.2. Beneficiaries on Segregated Funds in RBC DS Self-Directed                  Registered Plans	41
	8.3. Guaranteed Minimum Withdrawal Benefits (“GMWB”)	42
	8.3.1. Point of Sale Requirements	42
	8.3.2. Joint Life Payout Option on GMWBs	42
	8.3.3. Reset Transactions on GMWBs	43
	8.4. Canadian Investor Protection Fund Coverage	43
	8.5. EPSs	43
	9. Financial Planning	43
	10. Marketing and Client Communications	43
	10.1 Media Relations	43
	10.2 Advertising and Marketing Materials	44
	10.2.1. Marketing Materials	44
	10.2.2. Content of Insurance Marketing Materials	44
	10.2.3. Approval Process	44
	10.2.4. Securities Related or General Marketing Materials	44
	10.2.5. Client Testimonials	45
	10.2.6. Website Advertising	45
	10.2.7. Client Prospecting and Telemarketing	45
	10.2.8. Co-Branding Marketing Initiatives with Royal Bank	45
	10.3 Team Names	45
	10.4 Sales Illustrations	45
	10.5 Cooperative Funding	45
	10.6. Promotional Items and Activities from Insurance Suppliers	46
	10.6.1. Promotional Items	46
	10.6.2. Promotional Activities	47
	10.7. Separate Stationery for Insurance	47
	10.8. Use of Titles for Insurance Business	47
	Chart	48
	10.9. Advertising for Segregated Funds and Annuities	48
	11. Shared Premises	49
	12. Regulatory Inquiries	49
	12.3. Litigation	50
	12.3.1. Reporting	50
	12.3.2. General	50
Chapter 2 Product Suitability		51
	Ability to Save Adequately	51
	The Reason for the Goal (the Reward)	52
	The Goals	55
	Basic Product Information Requirements	56
	Determining Product Suitability	57
	Product Replacement	59
	Twisting, Churning	59
	Internal Twisting, Stripping	60
	Identifying Suitability Issues	60
	It is Not a Liquidity Issue but Rather a Suitability Issue	61
	Lock-boxing, Longevity Risk	61
	A Comprehensive Financial Plan	62
	Suitability in the Retail Sale of Financial Products	64
	Reputational Risk	68
	Reputational Contagion	69
	Determining Suitability According to the Report	69
	Internet Sales	71
	Annuity Surrender Values and Penalties	71
	Financially Sound Insurers	71
Chapter 3 Product Costs		73
	“Premium”, Actuaries	73
	Adverse Selection	75
	Purpose of the Insurance	75
	Risk Categories	76
	Life Insurance Death Proceeds	76
	The Terms “Insurance” and “Assurance”	76
	Term Insurance	77
	Permanent Life Insurance	77
	Whole Life Insurance	78
	Universal Life Insurance	78
	Life Insurance Surrender Charges	80
	Taxation	81
	Segregated Funds (Variable Annuities)	82
	The Guarantees	82
	Income Segregated Fund Guarantees	83
	Segregated Fund Costs	84
	Less Risk Brings Lower Yields	84
	No-Load, Front Load Commissions	84
	Implicit Interest Rate (i%)	85
	Delaying Annuitization when Interest Rates are Low	86
	Surrender Values and Penalties	87
Chapter 4 Anti-Money Laundering		89
	Abbreviation/Definition	90
	RBC Wealth Management Financial Services Anti-Money Laundering and          Anti-Terrorist Financing Policy	91
	Glossary of Abbreviations	91
	1.  Policy Objectives	92
	2.  Application of Policy	92
	3.  Restricted Business and Entities	92
	4.  Client Due Diligence (CDD)	93
	4.1 Due Diligence Requirements for Personal Clients	93
	4.1.1. Ascertaining Identification – Face-to-Face	94
	4.2. Due Diligence Requirements New Business Clients	95
	4.2.1. Confirm the Existence of the Client’s Business	95
	4.2.2. Collection of Beneficial Owner and Director Information	96
	4.2.3. Not-For-Profit Organizations	96
	4.2.4. Exceptions to Requirements (Business Clients)	96
	5.  When to Conduct Client Due Diligence	97
	6.  Enhanced Client Due Diligence	97
	7.  Third Party Determinations	98
	8.  Politically Exposed Foreign Person (PEFP) Requirement	98
	9.  Retention of Client Records	99
	10.  Suspicious Transaction or Attempted Transaction Reporting	99
	11.  “Red Flag” Indicators	100
	12.  Tipping	100
	13.  Large Cash Transaction Reporting	101
	14.  Mandated Money Laundering Reporting Officer (MLRO)	101
	15.  Training / Education	101
	16.  The Proceeds of Crime (Money Laundering) and Terrorist             Financing Administrative Monetary Penalties Regulations	102
	Appendix 1: Reporting Lines for Unusual/Suspicious or Attempted Transactions	102
	Representative	102
	Associate Director, Surveillance and/or Chief Compliance Officer,      DS FS	102
	Manager, AML Compliance and AML FIU	103
	Appendix 2: Reporting Lines for Possession/Control of Terrorist Property	103
	AML Financial Intelligence Unit (via CLF Scanning)	103
	Associate Director, Surveillance and/or Chief Compliance Officer,      DS FS	103
	Manager, AML Compliance	103
	Terrorism Produces Insurer Risk	103
	Legal, Reputational, and Operational Risk	104
	Proceeds of Crime (Money Laundering) and Terrorist Financing Act	105
	Object of the Act	105
	Company Objectives	107
	Policy Application	107
	Restricted Businesses and Entities	107
	AML Education	108
	A Change in Thinking	108
	“Integration Stage” of money laundering	108
	“Layering Stage” and “Placement Stage” of money laundering	109
	Product Identification	109
	Permanent Life Insurance Policies	109
	Annuity Products	109
	Any Cash Value Insurance Product	109
	1.  Single Premium Life Insurance Contracts	110
	2.  Early Policy Redemption	111
	3.  Claim Fraud	111
	4.  Cash Premium Payments	111
	5.  “Free Look” Periods on Newly Issued Policies	111
	6.  Collusion of Customer Intermediary and/or Insurer Employee	112
	7.  Third-Party Premium Payments	112
	8.  Risks Involved in International Transactions	112
	9.  Fraudulent Customers, Insurers, or Reinsurance Companies	113
	Money Laundering Indicators not Unique to Insurance Products	113
	Prohibiting Cash Transactions	113
	Use of False Addresses and Other Information	113
	Overseas Business from Higher Risk Jurisdictions	113
	Characteristics of the Money Launderer	114
Chapter 5 Annuities		116
	Annuity Terminology	116
	General Policy Provisions	120
	Planning for Increased Life Spans	121
	Longevity Risk	122
	Variable Annuities (Known as Segregated Funds)	123
	Maturity Guarantees	123
	Death Benefit Guarantees	124
	Performance of Funds is Not Guaranteed	124
	Types of Contracts	125
	Registered Retirement Savings Plans (RRSP)	125
	Section 146 of the Income Tax Act	125
	Non-Registered Annuities	126
	Prescribed Treatment / Non-Prescribed Treatment	127
	RRSP Types	129
	Contributions	129
	Spousal RRSP	130
	Taxation of Deferred Annuities	131
	The Decision to Buy	131
	Life Income Funds	132
	Immediate Annuities	132
	Payout Options	133
	Single Life Payout Option	134
	Joint-and-Survivor Payout Option	135
	Installment Refund Life Payout Option	135
	Variable Annuity Payout Option	136
	Term Certain Payout Option	136
	Other Products	136
	Dollar Cost Averaging	137
	Beneficiary Designations	137
	Contingent Beneficiaries (Subrogated Beneficiary in Quebec)	138
	The Insurance Contract	139
	Deposits	140
	Surrender Penalties	140
	Retirement Savings Plan (RSP) Endorsements	141
	Switches	142
	Investment Options	142
Chapter 6 Following the Sale		144
	Policy Delivery	145
	Confirming Medical History and Conditions	145
	Rescinding a Policy	146
	Returning Telephone Calls Promptly	148
	Increased Liability	149
	Liability Risks	150
	Express Authority and Implied Authority	150
	Contributory Negligence	153
	Servicing Requirements	155
	Updating Insurance KYC or Client Information on File	155

Thank you,

United Insurance Educators, Inc.

Email:  mail@uiece.com