After the death of a Representative, the family, sometimes left without income, often finds itself at a loss as to how the estate and related matters should be settled. Whom will the book of business be transferred to? Who will receive the commissions? How much will be inherited following the sale of the deceased Representative's assets?
An important step to be taken into account in anticipation of a disability or death is the designation of an individual to exercise the rights of the disabled or deceased Representative and execute documents on their behalf. As a prolonged disability or death may critically affect the survival of a business, setting up a proper succession plan and having the right documents in place will facilitate the transition process and ultimately relieve the family, agent, executor and Investia of an otherwise difficult burden.
It is essential that each of the Representatives coordinate a succession plan in the event of disability or death and inform Investia. The latter shall keep a copy in the Representatives’ files.
Since a disabled individual is unable to exercise their civil rights, an agent must be appointed to act on their behalf and administer their property. Such a designation may be done through a document commonly referred to as a mandate given in anticipation of disability. By appointing an agent to carry out their instructions in anticipation of disability, the Representative ensures that their family will not be left dealing with lengthy, complex and costly procedures to appoint such an agent. In the event of disability, the agent is the individual who will provide instructions regarding the transfer of client accounts.
The first purpose of the will is to designate the beneficiaries who will receive the Representative's assets upon their death. In the absence of a will, the property will be distributed among the heirs according to the laws of the applicable jurisdiction. The will also allows the designation of an executor (also known as an administrator or a liquidator in Quebec) to settle the estate. In the event of death, the executor is the individual who will provide instructions regarding the transfer of client accounts. It is important to ensure that the will contains provisions similar to those included in the Buy/Sell Agreement.
A written agreement setting out the details of the sale must be entered into between the parties. In order to help you ensure that no aspect of the contract is overlooked, an agreement template may be used as a reference. However, certain clauses may need to be adapted to reflect your specific situation (See Buy/Sell Agreement template - Death or Disability).
The agreement may take different forms; for example, it could state that the Acquiring Representative irrevocably commits to purchasing the book of business of the Selling Representative in the event of death or disability; or, it could include a right of first refusal which requires the agent/executor of the Selling Representative to first offer the book to the Acquiring Representative on predefined conditions prior to being able to sell it to another party.
In order to be able to fund the purchase of the deceased Representative's book of business, it is recommended that the Acquiring Representative purchase life insurance with a benefit amount which is sufficient to cover the purchase price agreed upon. As financing through life insurance may be done in several ways, each with different legal and tax implications, it is important to choose the appropriate strategy and adapt the Buy/Sell Agreement accordingly.
In anticipation of clients leaving Investia for another firm upon the transfer of client accounts, it could be appropriate to include a price adjustment clause in the Buy/Sell Agreement. However, it is important to bear in mind that should a reduction in the purchase price be requested, the responsibility for applying such a clause would fall on the agent or executor of the Selling Representative.
When you have established a Buy/Sell Agreement for a book of business in the event of death or disability, please forward it to the Investia Registration team at registration@investia.ca so that your agreement can be archived in your file. This will enable Investia to take swift action in the event of sudden death or disability.
It is important to remember that even if the Selling Representative executes this document, his or her legal representative (agent or executor) must be mandated according to the procedure required under the circumstances and complete and execute the document again on behalf of the Representative. You should be aware of the fact that Investia and its employees are prohibited from commenting on the legal aspects of the content of the agreement.
N.B.: A list of your clients concerned by the sale transaction should be forwarded to us with your request (please specify if your book consists of mutual fund and/or segregated fund clients so that your request may be transferred to PPI, if applicable).
Once a suitable buyer for the disabled or deceased Representative's book of business has been found, steps must be taken ensure a smooth and seamless transition of client accounts while taking into consideration what is best for the client, the family and Investia.
Below are the steps to be taken by the agent or executor of the Selling Representative upon a death or disability:
The agent or executor must contact the Acquiring Representative and Investia to notify them of the situation and initiate the transfer process.
Depending on the type of document executed as well as the specific situation and jurisdiction of the Selling Representative, certain formalities must be completed in order for the designation of the agent or executor to be effective. By way of example, it could be the homologation of the mandate given in anticipation of incapacity or the verification of the will by a court.
To initiate the book of business transfer process, the agent or executor of the Selling Representative must submit the Buy/Sell Agreement – Death or Disability The Branch Manager or a Representative from the same firm must ensure service to clients from the start of the period of the Representative's disability or date of their death to the date on which the book of business is purchased by the Representative taking over.
Upon the transfer, client accounts will be registered under the code of the Acquiring Representative. Upon receipt of all required and duly completed documents, accounts will be transferred in Univeris by Head Office and a transfer request will be forwarded to the appropriate fund companies. Once this has been done, the Representative is responsible for following up to ensure that the transfer is completed.
The Acquiring Representative may choose to be assigned a new code in order for their new client accounts to be administered separately from those of existing clients. A request and the appropriate form must be forwarded to the Registration Department for this purpose (See Commission Distribution Agreement)
The name of the Acquiring Representative will now appear on portfolio statements issued to clients by Investia.
For further details, please refer to section “Transfer of clientele – Immediate/Progressive sale of a book of business”.
In the event of the death or disability of a Representative, commission will be suspended until client accounts have been transferred over to the Acquiring Representative. Once client accounts have been transferred, the Acquiring Representative will be remunerated in accordance with the policies and procedures applicable in the case of such transfers.