The CRTC, your new regulator

(August 2008) If you think the CRTC’s do-not-call legislation won’t affect advisors, you could be in for a surprise when September 30 arrives. Calls to existing clients are exempt from the legislation if you’ve been in contact with these clients within 18 months, but calls to prospects and referrals are no longer fair game for your cold calls if those prospects have registered on the new, national do-not-call list (DNCL).

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Admittedly, the new system is complaint based — people need to file with the CRTC, the Canadian Radio-television and Telecommunications Commission, and let them know if you’ve violated the legislation, which might not happen if you’re invoking the name of friends, colleagues and family in your referral pitch. But it’s a risky bet — penalties for violators can range between $1,500 and $15,000 for a single infraction.

Here’s how the legislation works: Advisors use the phone to sell products and services to new and existing clients, to prospect for new clients and to sell or prospect, directly or indirectly, for themselves or another party. Unfortunately, according to the CRTC, this activity is exactly what makes a telemarketer. As such, advisors must now register with the regulator and answer to any violation of its rules.

There’s still some debate as to who’s on the hook for these sign-up fees. Later this month, the CRTC will release a bulletin addressing principal agent agreements that exist in the financial services industry.

Once registered, prior to making phone calls to prospects, advisors must check each phone number against the national do-not-call list. As the name implies, numbers on the list cannot be called. For numbers not on the list, though, it’s business as usual.

Scrubbing phone lists this way won’t come cheap. It’s not known yet what registration costs will be once the list is up and running, but for a company doing national telemarketing, for instance, the annual fee to access all area codes is over $11,000.

Most advisors though, are likely to opt for one of two options. The first: to pay 50 cents per number to check up to 100 numbers in any area code. The second option involves purchasing a few specific area code lists every month, every three months or twice a year. The latter option would cost a few hundred dollars. (The fees go to the third party who is operating the DNCL on behalf of the CRTC.)

Sandra Kegie, president of Kegie Consulting and executive director of the Federation of Independent Mutual Fund Dealers, thinks dealers, the principal agents, should be ultimately responsible for compliance and registration in this case. “Through regulation, the advisor doesn’t exist without the dealer,” she says. “I think mutual fund dealers will download the costs to the rep so it will be an add-on to any compliance charges [advisors] are already paying.”

In the case of independent agents who only sell insurance, they will likely need to register and pay the fees themselves.

And these fees won’t take long to add up, notes Susan Allemang, regulatory affairs with the Independent Financial Brokers of Canada. “If your business operates in an area where there are five area codes, and if you took a year’s subscription, it’s about $650 per area code,” she says. “For five area codes, it’s going to cost you an extra $3,000 a year to check the DNCL.”

Allan Wong runs a Thornhill, Ontario-based MGA, and personally trains new insurance agents. He says all of his rookies cold call, usually 100 phone numbers each day. Checking the DNC list for those 100 numbers will cost the agent $50 a day or $250 a week, up front.

“We try to get five appointments out of every 100 people we call,” he says. “Now we’ll have to find 100 people who are not on the DNCL, which makes the process longer and more tedious. This legislation makes it one step harder for people to survive in our industry. For a lot of new agents, it’s another roadblock for them to overcome.”

Referrals

Fortunately, most established advisors don’t cold call anymore to drum up business. That said, nearly everyone uses personal referrals to get new clients.

As of September 30, however, advisors will need what the CRTC calls “explicit” written or oral consent, directly from the referral before calling, if that friend, colleague or family member is registered on the DNCL.

“A lot of advisors are thinking that personal referrals are not cold calls. Under the CRTC legislation they are,” Allemang notes. She says the would-be client needs to call the advisor directly and say, “It’s okay for you to speak to me.” “The potential client needs to make the effort to and give permission to phone. That is much less likely to happen.”

Then there’s the matter of warm leads — people who fall somewhere between strangers and referrals.

Heather Phillips, vice-president and compliance officer at Armstrong & Quaile, says the firm is sending out an informal survey to find out how its 175 reps are currently prospecting for business. “Once we have the answers to that question, we can put policies and procedures in place,” she explains.

Since the DNCL will be enforced in response to consumer complaints, nothing happens to violators if the referral or prospect doesn’t complain.

If the person does report you, however, fines start at $1,500 per individual and can go as high as $15,000 per company. Nancy Webster Cole, senior manager, telemarketing regulations at the CRTC, says all consumer complaints will be investigated. Those filing a complaint will be asked if they purchased anything from the company recently, or within the past 18 months.

If the answer is no, the CRTC will check to see if the accused telemarketer has subscribed to the list. “We really want to encourage people to comply with the rules,” she says. “Every case will be handled differently depending on the situation.”

Next: If the telemarketer hasn’t signed up… Also: Alternative solutions to DNC.

If the telemarketer hasn’t signed up, Webster Cole says the CRTC will contact the person to report that there’s a complaint. They will also give the offender a certain number of days to sign up and respond. “If it happens again, we could impose the monetary fee.”

She expects complaints will be handled within 30 days.

Having said that, she also points out that consumers need to understand that “putting your name on the DNCL doesn’t means calls will end the next day.” Telemarketers have 31 days to update their calling lists.

Alternative solutions

Some are already finding ways around using the national DNCL list. For instance, since business phone numbers are exempt from the CRTC legislation, insurance advisor Martin Lipworth of Markham, Ontario, plans to ask for a referral’s business number and address.

Even though business numbers are fair game, Phillips is running scenarios like this in her head: “What will happen if you have a prospect who gives you a business card and they happen to use their home number as their business number? If the client complains to the CRTC because they are on the DNCL, then it would be up to us to prove that we were calling in the context of a business-to-business conversation.”

She also notes that many reps gather prospects’ business cards through ballot boxes at trade shows, with the intention of following up on the leads. Phillips now believes ballot slips that include an added disclosure giving advisors permission to call will be needed, to replace business card collection. “We already review all the marketing material,” she says, adding that review now needs to include trade shows and referral prospecting. “We have to get client permission every step of the way, anywhere we can.”

Kegie suggests those interested in contacting referrals get the referring client to contact the referral and the advisor by e-mail. “They’re both in agreement to talk, but to make it official, I’ll send them both an e-mail,” she explains. “That’s how I get referred to someone in my business dealings. It’s just being more efficient.”

Internal DNCLs

The CRTC also requires firms and independent advisors to establish and maintain their own internal DNCL of clients or prospects who specifically ask to be removed from call lists. You cannot simply direct these prospects to register with the national DNC list. “You must accept the consumer request and you must figure out a way to get the name on an internal list,” says Webster Cole.

Banks, and their respective brokerage and insurance arms, have had internal lists established for years, notes Maura Drew-Lytle, director of media relations and communications for the Canadian Bankers Association. “We believe that if customers want to stop unwanted telemarketing calls, they have that right. There’s no sense wasting time calling people who don’t want to be marketed to.”

Related Stories

• CRTC, your new regulator • New rules! To call or not to call, that is the question • Links and resources

Each individual legal entity of a company needs its own internal list (for example, Royal Bank and RBC Dominion Securities and RBC Insurance each need to maintain their own lists). Having said that, Drew-Lytle says some banks will likely maintain master DNC lists that will be shared with subsidiaries for efficiency purposes.

Other firms, on the other hand, have their work cut out. “At each individual office, I’m sure the reps know who they’ve called and cannot call back, but we’re going to have to create something at the corporate level,” says Phillips. Then this internal list, in addition to the DNCL, will need to be made available to all reps who prospect for business.

Despite the fees, time commitment and new processes that will need to be put in place, Kegie doesn’t see DNC legislation as having a negative impact on the industry. As she puts it, “When you take into consideration the exemptions available for telemarketers and look at the scope of what’s available, it’s more of a managing issue than anything else.”

Filed by Deanne Gage, Advisor.ca. deanne.gage@advisor.rogers.com

(08/14/08)