Overview of Client Focused Reforms and Conflicts of Interest Disclosures
The Canadian securities regulators are enhancing their rules to better support your interests as a client. These enhanced rules are based on the fundamental concept that your interests must always come first. Here at Transition Financial Advisors Group, Inc. (‘TFA’) our goal is to be acting in our clients’ best interests at all times and these new rules require us to provide enhanced disclosure to you so that you have greater visibility of our efforts to always act in your best interests.
About Transition Financial Advisors Group, Inc.
TFA is registered under the securities laws of Alberta, British Columbia, Manitoba, Ontario and Saskatchewan as an adviser in the category of portfolio manager. National Instrument 31103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (‘NI 31103’) requires TFA to provide you with certain information to assist you in understanding any potential conflicts of interest as they relate to you and our firm.
Conflicts of Interest
What exactly is a conflict of interest? A conflict of interest means that there is an influence which may affect the advice we, as your portfolio manager, would make in the management of your account, or conversely it may affect the decision that you, as the client, would make regarding your account with us.
How We Manage of Conflicts of Interest
In general, we deal with and manage relevant conflicts as follows:
- Avoidance: This includes avoiding conflicts that are prohibited by law as well as conflicts that cannot effectively be addressed.
- Control: We manage acceptable conflicts through means such as policies and procedures.
- Disclosure: By providing you with information about conflicts, you are able to assess their
significance when evaluating our advice.
At TFA, we have adopted policies and procedures to assist in identifying conflicts of interest, and once a material conflict of interest is identified, we will avoid it. Conflicts deemed too significant to be addressed through controls or disclosures will be avoided. If the conflict cannot be avoided, we will control the conflict with policies and processes, and where it will assist in managing the conflict, we will provide disclosure to you in order to explain how we manage the conflict in your best interests. This disclosure will assist you in helping to understand the nature of your relationship with TFA.
Specific Material Conflicts of Interest
Our existing or reasonably foreseeable material conflicts of interest are described below. We are also disclosing those potential conflicts that we avoid, in order to better explain how we put the best interests of our clients first.
Conflicts Arising from Proprietary Products
TFA avoids this conflict as it does not use any proprietary products in the management of client accounts.
Conflicts Arising from Third-party Compensation
TFA avoids this conflict by being “feeonly” as we are only paid by you. We do not receive any thirdparty party compensation from the sale of any thirdparty products, such as thirdparty mutual funds which pay trailing commission.
Conflict Arising from Retirement Roll-Over Transactions
A client or prospective client leaving an employer typically has four options regarding an existing retirement plan (and may engage in a combination of these options): (i) leave the money in the former employer’s plan, if permitted, (ii) roll over the assets to the new employer’s plan, if one is available and rollovers are permitted, (iii) roll over to an Individual Retirement Account (“IRA”), or (iv) cash out the account value (which could, depending upon the client’s age, result in adverse tax consequences). If TFA recommends that a client roll over their retirement plan assets into an account to be managed by TFA, such a recommendation creates a conflict of interest if TFA will earn a new (or increase its current) advisory fee as a result of the rollover. No client is under any obligation to roll over retirement plan assets to an account managed by TFA.
Conflicts Arising from Internal Compensation Arrangements and Incentive Practices
TFA avoids this conflict as we do not have any employee based sales incentives, sales targets or other incentives that would place our clients’ best interests at odd with our interests.
Conflicts in Fee-Based Accounts
TFA only offers feeonly accounts. TFA controls this conflict as there are no products sold to clients for investment purposes that include embedded compensation. TFA provides disclosure of all fees and charges in our account opening documents at the onset of our agreement. TFA has ongoing KYC “know yourclient” responsibilities and assessment of suitability obligations which it performs pursuant to our fiduciary obligations to always act in our clients’ best interests. Annual fees and operating charges paid each calendar year are reported to clients with our annual reports on charges and compensation we provide to clients.
Conflicts Between Clients
TFA manages this conflict as it provides disclosure to our clients that our services are not exclusive in our Wealth Management Agreement (‘WMA’).
Conflicts Related to Referral Arrangements
TFA does not have any referral arrangements at this time. However, should TFA ever enter into a referral arrangement with a third party, detailed disclosure of the referral arrangement will be provided to our clients, and all referred clients would be required to provide their consent to, and acknowledgement of, the referral arrangement.
Conflicts Arising from Having Full Control or Authority Over the Financial Affairs of a Client
TFA avoids this conflict as the firm, nor any individuals in the firm have full control or authority over the financial affairs of a client and TFA has policies and procedures to avoid this situation from occurring.
Conflict Arising from Individuals Who Serve on Public Boards and Outside Business Activities
TFA avoids the conflict of interest where an employee serves on the board of a public company as no employees of TFA serve on any public boards. Regarding outside business activities by employees, TFA manages this conflict as all outside businessrelated roles or relationships, such as directorships or trusteeships of any kind, paid or unpaid roles with charitable organizations, must be disclosed and approved by TFA. Where such relationships may give rise to a situation where our clients should be made aware, clients would be provided with disclosure of the outside business activity.
Trade Execution – Best Execution
The majority of trades processed in client accounts are for ETFs, where pricing is not an issue. For other securities, trading is done at the custodial account level on a market order basis. As such best execution is a function of having our custodian provide competitive commission rates for the trades. Custodians are required to follow the same bestexecution and fairness guidelines that TFA adheres to.
Trade Execution – Use of Client Brokerage Commission (Soft Dollars)
Although not a material consideration when determining whether to recommend that a client utilize the services of a particular brokerdealer/custodian, TFA can receive from our existing custodians (or another brokerdealer/custodian, investment platform, unaffiliated investment manager, mutual fund sponsor, or vendor) without cost (and/or at a discount) support services and/or products, certain of which assist TFA to better monitor and service client accounts maintained at such institutions. Included within the support services obtained by TFA may be investmentrelated research, pricing information and market data, software and other technology that provide access to client account data, compliance and/or practice managementrelated publications, discounted or gratis consulting services, discounted and/or gratis attendance at conferences, meetings, and other educational and/or social events, marketing support, computer hardware and/or software and/or other products used by TFA in furtherance of its investment advisory business operations. Certain of the above support services and/or products assist TFA in managing and administering client accounts. Others do not directly provide such assistance, but rather assist TFA to manage and further develop its business enterprise. TFA’s clients do not pay more for investment transactions effected and/or assets maintained at our custodians as a result of this arrangement. There is no corresponding commitment made by TFA to our custodians or any other entity to invest any specific amount or percentage of client assets in any specific mutual funds, securities, or other investment products as result of the above arrangement.
Trading and Pricing Errors
TFA controls this conflict by having a policy when there is a trading or pricing error, and where a client has been negatively impacted, their account will be made whole.
Personal Trading, Use of Inside Information for Personal Gain and Gifts and Entertainment
TFA avoids the conflict of personal trading in the same securities as our clients as we have policies which prohibit the use of material nonpublic information for personal gain. Likewise, TFA manages the conflict of personal trading in the same securities as our clients as we maintain a list of securities which requires the preapproval of the purchase or sale of any securities by all TFA personnel where a conflict may exist. TFA does not permit the acceptance of gifts or entertainment beyond what we consider reasonable.
Valuation of Portfolio Securities
TFA controls this conflict as valuations of client holdings are determined by third parties and from publicly available market data.