Advisor’s Edge talks privacy in mid-January edition

(January 22, 2004) As a financial advisor, it’s your business to know your client — in fact, it’s required through the know-your-client rule. But have your clients given you permission to use that knowledge for other uses?

The new privacy law — Personal Information Protection and Electronic Documents Act (PIPEDA) which came into force on January 1, 2004 — has the potential to become one big headache for advisors. To help alleviate some of that stress, Advisor’s Edge is digging up the dirt on privacy in its new mid-January issue.

“Obviously these privacy rules are being taken very seriously,” says Deanne Gage, managing editor for Advisor’s Edge. “This is definitely new to a lot of private-sector industries, like financial services. We thought it would be interesting to look at how specifically advisors are going to have to change their practice to be compliant with the new privacy laws.”

Gage says it may take some getting used to, but advisors are now required to keep their client information virtually under lock and key, limiting access within the office to those with a specific business need for the data.

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“We talked to some advisors about how they are coping with the change, what changes they’ll be making and some lawyers who offer some suggestions as to how advisors can manage their practice around PIPEDA.”

Also in this issue is a look at Henson trusts in “Life Support.”

“Henson trusts are an estate-planning strategy for clients who are disabled,” says Gage. “If you want to leave part of your estate to someone who is disabled, putting it into a Henson trust might make sense.”

The Henson trust allows the disabled beneficiary to receive funds without facing a clawback of government benefits.

“This article explains how a Henson trust works, some of the nuances around them and different scenarios where these trusts might make sense.”

These structures are not active in every jurisdiction, with Alberta, Nunavut and Northwest Territories disallowing them and they are often challenged in Newfoundland and Labrador.

Dan Hallett takes a look at “risk” in “Safety Can Veil Risk,” as investors discount the downside of investment options traditionally labeled “conservative,” like bond funds.

“There’s a tendency, especially on the consumer side but also among some advisors, to buy the ‘hot product,'” says Gage. “This article explores the various perceptions that you have to address with ‘hot products’ and how you have to understand the risks involved. For example, people think of bonds as safe, but there are risks involved in bonds as well.”

On the topic of risk and safety, David Wm. Brown takes a look at critical illness insurance (CI) from a new perspective.

“David does a good job of explaining why people need to buy CI now. He uses an example from personal experience,” says Gage.

Brown tells the story of a friend who suffered a heart attack. She recovered, but was left with the realization that she could just as easily have faced an extensive recovery period.

“She could have become very ill and therefore needed the insurance,” says Gage. “Work insurance will not cover you to the extent that your might want. CI will give you the income supplement you might need.”

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com

(01/22/04)

Steven Lamb