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Valuing an Asset A Financial Planner or Insurance Agent’s book of Business

Date: 03 Mar, 2018

We have represented on a number of occasions spouses who either are financial planners or are separating from one. Financial planners are undergoing a seismic consolidationshift in their industry. Financial planners overseeing a set of assets of even thirty milliondollars may find themselves as being deemed to be too small to be worth the trouble for a financial institution to grant them a realistic commission upon which to live on. However, those that are able to make the grade, the various large stock brokerage firms, most of whom are controlled by banks, understand that the customer’s loyalty is not to the bank, but rather to the individual financial planner. The institutions at times attempt to lure financial planners to shelter under their umbrella. These transfers are often accompanied by substantial financial inducements. Those inducements are generally configured as forgivable loans. As an example, if a financial planner moves from one bank to another, they may receive a large amount of money in the form of a forgivable loan. They will be “lent” all the money at the time of the move, but it is only “earned” at the end of each year that they remain within the term of loan. As an example, if Mr. Jones moves to CIBC, CIBC may grant him a half a million dollar forgivable loan. However, the loan is forgiven in increments of hundred thousand dollars for every year that he stays. This way the loyalty of Mr. Jonas is bound by these golden straps for hopefully at least a five year term.

This brings up many complicated issues, which have been discussed elsewhereon this website. Is the money earned each year as income or is it property? How is this dealt with at the time of separation?

Generally from a property perspective, one or both of the parties will engage a CharteredBusiness Valuator to come up with the value of the book of business as of the date of separation. It is an extremely complicated process, not much different from alchemy.

An advanced degree in trigonometry, calculus and algebra with a dash of Freudianpsychology, will assist one in properly interpreting such a report. Fortunately we at Dale Streiman Law LLP have the services of highly competent chartered business valuators to turn these esoteric treatise into concise conclusions.

However at times, one or both of the parties will either not hire chartered business valuators or may argue that their conclusions are only a guess and are incorrect. Justice Richard Bennett in the Emerson case, which was recently subject to a review by the Ontario Court of Appeal, quite properly found that the very amount given almost at the time of separation by one institution as an inducement to the financial planner to jump, was the best evidence on the true value of the book of business.

We repeat a steady and experienced hand is required to navigate a separation when a financial planner is part of the equation.