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The Financial Services Regulatory Authority of Ontario (FSRA) has notified that it’s going to take action over the training practices of the life insurance Managing General Agent (MGA) Greatway Financial.
The regulator is aiming to take compliance action on the MGA, claiming that Greatway is “committing acts that might reasonably be expected to result in an unfair and deceptive act or practice.”
Greatway needs its agents to take necessary training, which includes courses on legal obligations such as anti-money laundering procedures, according to the FSRA. However, the sole product training necessary for agents is to sell Universal Life (UL) plans using the technique of an “Insured Retirement Plan” (IRP); these are policies that the government has referred to as “overfunded.”
According to the FSRA, an IRP is a sophisticated financial strategy that enables customers to get life insurance and possibly supplement retirement income utilizing a combined income as well as an investment strategy. To accrue the money, customers who purchase such a policy will need to contribute more to the contracts on top of the life insurance. After on, this collected savings can be obtained by taking money out of the contracts or borrowing against the policy’s cash value.
The FSRA pointed out that the viability of an IRP plan depends on ongoing and continued contributions, in addition to borrowing eligibility and authorized tax deferrals. It was also emphasized that the expense of insurance premiums limits the amount of cash that insureds may “save” through the policies, and the insurance rate would undoubtedly rise with time as the insured becomes older.
According to FSRA, an IRP plan is typically taken into account for higher net-worth customers who need tax-effective solutions and have the financial means to make monthly contributions. Following an investigation, the regulator found that Greatway’s training instructs dealers to disguise the overfunded UL plan and IRP approach as insurance by having them offer it to all consumers as “savings” instead. The FSRA also charged Greatway with instructing its representatives to downplay the dangers of such UL items.
Greatway Financial gave a response after the FSRA’s request. “We respect the FSRA’s role as the regulator for our industry, but we do not believe the FSRA’s report accurately reflects how we do business,” the company stated. “On the contrary, we believe that the facts do not support a number of items the FSRA has raised, and we will be requesting a hearing before the Financial Services Tribunal with the primary purpose of allowing Greatway Financial time to resolve matters with the FSRA in a non-adversarial manner.”