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Conflicts of Interest Disclosure Statement

Polaris Financial Inc. (Polaris) is registered as a Portfolio Manager whose principal regulator is the Ontario Securities Commission. Polaris is also registered with the Financial Services Regulatory Authority of Ontario (FSRA) as a provider of life and disability products for clients.

Securities legislation in Canada requires Polaris to make certain disclosures regarding conflicts of interest. This statement is to inform you of:

  • the nature of any conflict of interest that may be expected to arise
  • the potential impact and the risk that the conflict of interest could pose to a client
  • how the conflict of interest has, or will be, addressed

This statement applies to all divisions of Polaris Financial Inc.

Definition: Material Conflicts of Interests

A material conflict of interest exists:

  • if the interests of Polaris (or an individual acting on its behalf) and a client are inconsistent or divergent
  • in situations where Polaris (or an individual acting on its behalf) may be influenced to put their interests ahead of a client; or
  • monetary or non-monetary benefits available to a registrant, or potential detriments to which a registrant may be subject, may compromise the trust that a reasonable client has in their registrant

How the conflict of interest has, or will be, addressed

Conflicts of interest may be large enough to be material (in which case they are addressed as described in this document) or small enough to be immaterial (in which case no further action is taken to address them). In determining the materiality of a conflict of interest, Polaris will consider whether the conflict may be reasonably expected to affect the decisions of its client in a particular situation or the recommendations and/or decisions Polaris makes on behalf of its client.

Polaris addresses material conflicts of interest in the best interest of our clients. This is done by placing the interests of clients first, ahead of the personal interest of Polaris and any other competing considerations. As such, Polaris takes reasonable steps to identify, address and avoid any existing material conflicts of interest or foreseeable material conflicts of interest that we would reasonably expect to arise (i.e., between Polaris and a client and between each individual acting on our behalf and a client). Polaris determines the level of risk for each material conflict.

Polaris avoids situations that would result in a serious conflict of interest resulting in too high a risk for clients or market integrity and will ensure that it will act in the client’s best interest. In other circumstances involving a conflict of interest, Polaris takes the appropriate steps to control the conflict of interest. Similarly, if a particular conflict is capable of being addressed by using controls, but the specific controls being used by us are not sufficiently mitigating the effect of the conflict, we will avoid that conflict until we have implemented controls sufficient to address the conflict in the best interest of the client.

Individuals acting on behalf of Polaris also are required to identify potential conflicts of interest and bring them to the attention of Polaris, while also disclosing any relevant information that may arise in a potential conflict of interest to Polaris. If the individual is uncertain as to whether a potential conflict of interest exists or could arise, the matter should be directed to the Chief Compliance Officer for discussion. Any individual who identifies a potential conflict of interest will await approval from Polaris’ Chief Compliance Officer prior to acting on behalf of the client, to ensure that any actions taken on the client’s behalf are in their best interest.

Polaris takes proactive measures to anticipate reasonably foreseeable conflicts of interest, assesses the materiality of such conflicts to distinguish between those conflicts that are material and those that are not and has developed adequate procedures to identify existing conflicts.

The situations in which Polaris could be in a conflict of interest, and the way in which Polaris intends to respond to such conflicts, are described below.

Referral Arrangements – From time to time, Polaris may enter into referral arrangements where another party refers clients to us or where we refer clients to a third party for a fee. Referral arrangements fall within the scope of the general conflict of interest provisions in the revised rules and also are addressed in several standalone provisions in the revised rules. The CSA thinks that paid referral arrangements are inherent conflicts of interest that are “almost always material”.

When referring a client to a third party, or accepting a referred client, Polaris must ensure that such a relationship is in the best interest of the client. Polaris should not enter into a referral arrangement solely because of the referral fee that they will receive from that party. Furthermore, if a client pays more for the same, or substantially similar, products or services as a result of a referral arrangement, Polaris would not be seen as appropriately discharging its obligations to its clients.

In order to mitigate any actual or potential conflicts, Polaris will bring the referral relationship and the terms of that referral relationship to the attention of the referred client.  In addition to client disclosure, Polaris has adopted several procedures to ensure it determines that accepting a referral is in a referred client’s best interest. These procedures include: (i) requiring Chief Compliance Officer approval of any referral arrangement; (ii) conducting due diligence on potential third-party referrers; (iii) ensuring that the referred client does not pay additional fees or compensation for the same service or product provided to other Polaris clients as a result of the referral arrangement; and (iv) keeping a record of all payments related to Polaris’ referral arrangements.

The following procedures are to provide clear direction on the procedures to be followed in order to address the potential conflict of interest in a referring third party (a “third party”) having a financial interest in the introducing of clients to Polaris.

It is the responsibility of senior management to review and approve referral arrangements with third parties. Polaris’s standard referral agreement will be adapted to each specific circumstance under which an agreement is entered into.

If Polaris enters into a referral arrangement with a registered firm, the agreement will be entered into with the registered firm on behalf of its employees, not with employees directly.

Polaris shall, except in the case of exceptions approved by the CCO, only enter into referral arrangements with third parties who are:

  • Registered appropriately to participate in these types of transactions.  

Prior to Polaris entering into a referral arrangement with a Third Party, the following due diligence steps must be taken:

  • The Third Party must provide proof of its registration with its applicable regulator(s), if applicable.
  • A background check of the Third Party shall be initiated when warranted by the information obtained during the due diligence process

Following the completion of the due diligence process, and prior to any referral fees being paid, Polaris and the Third Party shall enter into a written referral agreement which will outline, at a minimum, the following:

  • the roles and responsibilities of each party
  • limitations on any party that is not a registrant (to ensure that it is not engaging in any activities requiring registration) 
  • the disclosure to be provided to referred clients, and
  • who provides the disclosure to referred clients

If Polaris is receiving the referral, Polaris is responsible for:

  • carrying out all activity requiring registration that results from the referral arrangement, and
  • communicating with referred clients

Prior to Polaris dealing with a new referred client, Polaris must provide the client with a copy of the required disclosure as stated below. A signed acknowledgement by the client will be kept in the client file.

The written disclosure provided to clients will contain the following:

  • the name of each party to the referral arrangement;
  • the purpose and material terms of the referral arrangement, including the nature of the services to be provided by each party;
  • any conflicts of interest resulting from the relationship between the parties to the referral arrangement and from any other element of the referral arrangement;
  • the method of calculating the referral fee and, to the extent possible, the amount of the fee;
  • the category of registration of each registrant that is a party to the agreement with a description of the activities that the registrant is authorized to engage in under that category and, giving consideration to the nature of the referral, the activities that the registrant is not permitted to engage in;
  • if a referral is made to a registrant, a statement that all activity requiring registration resulting from the referral arrangement will be provided by the registrant receiving the referral;
  • any other information that a reasonable client would consider important in evaluating the referral arrangement.

If there is any change to the agreement, clients will be notified of this as soon as possible.

It is the responsibility of the CCO of Polaris to review and ensure that proper disclosure is being provided to clients.

Insurance registration – Polaris is registered with the Financial Services Regulatory Authority of Ontario (FSRA) as a provider of life and disability products for clients. Polaris and its advisors may receive commissions when these products are purchased by a client. These commissions may act as an incentive for a Polaris advisor to recommend an insurance product instead of an alternate investment solution, or in cases where a client may not have adequate financial resources to fund a particular insurance policy. To manage any potential conflict, we use a combination of avoidance, control and disclosure as follows:

  • Avoidance: investment products such as segregated funds with deferred sales charges would be avoided. Segregated funds would only be used for smaller accounts or when capital preservation or creditor protection is required.
  • Control: only no-load segregated funds with low MERs are allowed.
  • Disclosure: the potential for conflict will be disclosed to the client, verbally and in writing, before any insurance products are sold

All insurance policies sold to clients are subject to approval of the Chief Compliance Officer

Conflicts of Interest Relating to Polaris Personnel/Personal Trading – Polaris’ personnel may find themselves in situations where their personal interests are in conflict with those of a client.

Polaris’ Code of Ethics and related policies and procedures establish basic principles for employee conduct which, among other things, prohibit an employee from:

  • Using confidential information acquired in connection with his or her duties
  • Accepting gifts, entertainment and compensation that would influence decisions to be taken in the course of performing their duties
  • Engaging in activities that could interfere or conflict with their duties.

Polaris does not allow any of its personnel to engage in activities outside the scope of their duties, including serving as a director of a company or other entity, without first ensuring that such activities do not compromise the interests of Polaris’ clients.

When Polaris staff invest in the same securities as Polaris’ clients, there is a perceived or potential conflict of interest that the staff person may benefit from opportunities at the expense of Polaris’ clients. Polaris has a Code of Ethics that sets out standards for business conduct to prevent conflicts of interest and has established personal trading policies and procedures for employees, officers and directors who have access to information about client portfolios.

Fair Allocation Among Clients – Polaris is appointed to act as an advisor to many clients. It may aggregate orders for a number of client accounts for the purchase of a particular security. It may also rebalance client portfolios. Unfair allocation of trades by Polaris, and preferential treatment in the order of rebalancing are potential conflicts of interest. To avoid any potential conflicts of interest, Polaris has adopted trading policies designed to ensure fair allocation of securities among clients. A copy of Polaris’ fair allocation policy is provided to new clients before opening an account and thereafter when a significant change to the policy is made. A copy of this policy is available on request. 

Differing Management Fees - Polaris has a default fee schedule that applies to all new clients.

Certain client fees may differ from the default fee schedule and this could pose a conflict of interest. In these cases certain clients may pay more for their services than others.

There is no requirement for the firm to use the proposed Polaris Default Fee Schedule. However, if a client’s fee schedule is different from the default fee schedule, the Polaris advisor must justify the variances in the fee schedule using the below criteria. The Polaris advisor will need to provide these justifications to the CCO and request approval for the revised fee schedule. The justification must relate to either the registrable activity component of the fee and/or the unregistrable activity component of the fee.

All fee schedules, whether default or custom, must be approved by the CCO.

Acceptable Justifications (Reasons/Criteria) for Variation in Fee Schedules: 

  • Investment type/products sold (i.e., model portfolio, ETFs, customized portfolio, specialized investment advice, complex investment products or strategy etc.)
  • Investment service level and non-registerable service level (i.e., frequency of meetings, number of accounts, number of household members etc.)
  • Investment complexity of the clients’ circumstances, accounts, tax management and investment management strategies. The more complexity there is, the more time and resource input is required.
  • Employee, family, and friend’s discount, because these clients often require less time and resources in services.
  • The historical relationship between the client and the wealth advisor prior to moving to Polaris and what was negotiated between them.
  • Non-registerable service types:
    • Financial Planning (varies significantly by scope and depth according to practitioner and client needs)
    • Corporate planning, restructuring and succession planning
    • Tax preparation
    • Retirement, trusts and estate planning
    • Retirement coaching
    • Family money discussions, governance, and mediation
    • Charitable giving and legacy planning
    • Group benefits
    • Account administration and service coordination
    • Content and education
    • Insurance and risk management
    • Any legal services that may be associated with the above

Minimum Fees 

Please note that advisors are not required to charge a minimum fee for accounts of firm staff and/or family of firm staff.

Other Conflicts of Interest – From time to time, other conflicts of interest may arise. Polaris will continue to take appropriate measures to identify and respond to such situations fairly and reasonably and in the best interests of its clients.

This document is kept current and is posted on our external website at https://polariswealth.ca/conflict-of-interest-disclosure or you may contact us for the most recent version.