Conflicts of Interest Statement

Securities legislation in Canada requires LP Financial Planning Services Ltd.  (LP Financial or we) to make certain disclosures regarding conflicts of interest.  This statement is to inform you of the nature and extent of the conflicts of interest that might be expected to arise between LP Financial and/or our advisors and our clients.

It is important for you to be informed about how we identify and respond to conflicts of interest in order to minimize their impact.  We consider a conflict of interest to be any situation where the interests of a client and those of LP Financial and/or our advisors do not align or may be perceived not to align.  We recommend that you review the updated conflicts of interest disclosure carefully, and we encourage you to reach out to your advisor if you have any questions. We are committed to ensuring that the interests of our clients always have precedence.  As a mutual fund dealer and member of CIRO, we must ensure effective management of any situation that could give rise to a conflict of interest.  We seek to manage conflicts of interest in the best interests of our clients.

A conflict of interest arises when the interests of different persons, particularly your interests and those of LP Financial or one of our advisors, are incompatible or divergent.  As a result, situations may arise that may influence, or be perceived to influence, LP Financial or one of our advisors to act in their own interests and not in your best interests.

Accordingly, conflicts of interest may occasionally arise between you and:

• LP Financial or your advisor
• other clients of LP Financial
• a person or company with whom we have a relationship, including the related fund managers and the other entities within the PFC corporate group.

Canadian securities laws require us to take reasonable steps to identify and respond to material conflicts of interest in your best interests.  We have done so by adopting policies and internal procedures to meet those requirements effectively.  We also are required to tell you about them, including how the conflicts might impact you and how we address them in your best interests.

We have policies and procedures in place to address how we will manage material conflicts of interest in your best interests, which are described below.

• We avoid conflicts prohibited by law and material conflicts that we cannot effectively manage in your best interests. Some conflicts cannot be avoided. In situations where we do not or cannot avoid conflicts and where our interests may compete with yours, we will always act in your best interest.
• We control or manage acceptable conflicts in a number of ways:
  • by physically separating different business functions,
  • by restricting the internal exchange of information in person or through systems,
  • by reducing the possibility of one part of our organization unsuitably influencing another,
  • by removing the financial incentive of an advisor to favour a particular product or service over another that may be more suitable, and
  • by setting up and testing our operational review and approval processes.

Material Conflicts arising from being a member of the Power Financial Corporation (PFC) Group

LP Financial is a majority owned indirect subsidiary of PFC.  Our relationship to PFC and its other financial services subsidiaries (collectively the PFC Group) creates conflicts of interest when we provide products and services to you that are sourced from or provided by other members of the PFC Group.

PFC and its various financial services subsidiaries, including LP Financial and VPI, are commercial businesses and seek to maximize profits while providing fair, honest and appropriate services to clients.  This means that we may encourage you to do more business with us and the other members of the PFC Group, and we may engage affiliates to provide us with products and services for your account, but will always do so in a way that we consider in your best interests.  We will only enter into transactions or arrangements where we are permitted under applicable securities laws and where we believe they are in your best interests.

Although LP Financial is under common ownership with the other members of the PFC Group and may from time to time have directors and officers in common with these other firms, LP Financial is a separate and distinct corporate entity. Any relationships that a LP Financial director or officer might have with another PFC Group entity do not raise material conflicts as none of the individuals is in a position to personally influence clients of LP Financial to invest in any of the investment products of the PFC Group, nor are they compensated by any of the PFC Group entities on a commission or other basis that could result in decisions being made or influence being exerted, against the interests of any of our clients. In addition to applicable regulatory provisions and contractual provisions respecting any business arrangements that may exist between LP Financial and the other PFC Group entities, the directors, officers and employees of each of the firms are subject to a code of conduct governing their actions. These codes of conduct are supplemented by our internal compliance policies and procedures. LP Financial generally carries on its activities independently from the other firms that form part of the PFC Group. However, from time to time there may be certain cooperative business arrangements between it and other firms, such as arrangements relating to introduction of clients, distribution of products, advisory relationships or administrative support. The conflicts described in this section may raise perceptions that LP Financial will favour the business interests of the various members of the PFC Group rather than your interests. These conflicts and how LP Financial manages them to ensure that it acts in your best interests are described below.

Related service providers to LP Financial

The following PFC Group entities may provide services to you and/or LP Financial.

• Companies including Value Partners Investments Inc., Canada Life Investment Management Ltd., Counsel Portfolio Services Inc. and Mackenzie Financial Corporation manage investment funds which LP Financial representatives may recommend as investment options for your accounts with LP Financial.
• Companies including Canada Life Asset Management Limited, Irish Life Investment Managers Limited, Mackenzie Investments Corporation, Mackenzie Financial Corporation, Value Partners Investments Inc., Setanta Asset Management Limited, The Putnam Advisory Company LLC may be the portfolio manager of certain investment funds, which LP Financial representatives may recommend.
• LP Financial investment representatives may be licenced as insurance agents with The Canada Life Assurance Company (Canada Life) or Lawton Partners Insurance & Estate Planning Ltd and may recommend you acquire insurance and insurance products, such as segregated funds, provided by Canada Life.

In all cases, LP Financial monitors the securities services and products provided and ensures that that the services and products, as applicable, are provided to you at market rates and are suitable for your account and appropriate for you.   Where LP Financial provides you with advice in respect to the purchase or sale of securities or buys or sells securities for your account, the disclosure must be made before we provide you with the advice. This document provides you with the required disclosure. We will also provide this disclosure in the trade confirmation and monthly account statements provided to you.

VPPW – Proprietary Division of LP Financial –  Focused on the Value Partners Pools

If your advisor is associated with VPPW, the proprietary division of LP Financial, your advisor will generally recommend that you invest your account in securities of the Value Partners Pools, which are publicly offered mutual funds managed and promoted by our affiliate, VPI.   Your advisor may also recommend mutual funds managed by one of our related fund managers if your advisor considers that the fund(s) are suitable for you and fill a gap in the range of funds within the Value Partners Pools. Given our affiliation with VPI, recommending primarily only Value Partners Pools is a conflict of interest, and you may be concerned about the restricted range of investments.  To mitigate the associated conflicts of interest and address them in your best interest, we have adopted several controls, including:

• We are the principal distributor of the Value Partners Pools, which means we review and are responsible for the disclosure in the prospectus documents of the Value Partners Pools to the best of our knowledge, information, and belief.
• Robust oversight process to ensure the recommendations are suitable for you.
• Robust due diligence on the Value Partners Pools, including their performance, the securities they hold, their concentration, and determining which client profiles will be best suited to invest in them. We conduct periodic due diligence on comparable non-proprietary products and evaluate whether the Value Partners Pools are competitive with available alternatives.
• We have established an Investment Product Committee (the Investment Product Committee) consisting of advisors who do not have a material interest in the CL Earnout Payment (as such term is defined below). The Investment Product Committee will monitor the Value Partners Pools and the other mutual funds available through the non-proprietary division of LP Financial, including those managed by our other related fund managers to ensure appropriateness of investment and performance.
• We compensate our proprietary division advisors and non-proprietary division advisors in the same manner. In other words, your advisor has no incentive by way of compensation to recommend the Value Partners Pools or any of the mutual funds managed by our related fund managers.

Non-Proprietary Division of LP Financial – Recommendations to Invest in Value Partners Pools, Canada Life Funds and Mackenzie Funds and other mutual funds

If your advisor is associated with our non-proprietary division, they may recommend that you invest in the Value Partners Pools or Related Funds when they could recommend other non-related mutual funds.  Given our membership within the PFC Group, recommending one of the Related Funds is a conflict of interest, and you may be concerned about whether this recommendation puts your interest first.  To mitigate the associated conflicts of interest and address them in your best interests, we have adopted several controls, including those outlined above and a robust evaluation of all mutual funds that we allow our advisors to recommend to you.  We also compensate our advisors in ways that will not bias recommendations towards Related Funds over non-related mutual funds. In other words, your advisor has no incentive by the form of compensation to recommend any Related Fund over any other mutual fund. 

Advisors Entitled to the CL Earnout Payment

As of a result of the September 8, 2023 transaction that resulted in LP Financial becoming part of the  PFC Group, certain LP Financial executives and advisors who previously held shares in our parent company, VPGI, received payment for their shares on closing at the agreed share price paid to all shareholders of VPGI.    Those LP Financial executives and advisors also are entitled to the CL Earnout Payment described below.  Three advisors, who were the founders of VPGI, owned less than a combined 17.00% of the outstanding shares of VPGI.  All other advisors who owned shares in VPGI owned less than a combined 15.00% of the outstanding shares of VPGI, with no one advisor owning more than 1.50%.

The payment provisions in the purchase agreement entered into by the shareholders of VPGI and Canada Life, provide that an additional amount is payable three years after the closing as an earnout payment (the CL Earnout Payment). The CL Earnout Payment mechanism is designed to ensure that the performance of the VPGI business during the three-year period following the closing of the transaction (the earnout period) is generally consistent with the performance of the VPGI business during the 12 month period prior to closing, as measured by total adjusted revenue growth (total adjusted revenue growth) during the earnout period, being the cumulative amount of revenue of the VPGI business during the earnout period which exceeds run-rate revenue, adjusted for market movements and excluding interest income and other revenue sources that are non-recurring in nature.

The CL Earnout Payment may be viewed as an influencing factor on whether or not advisors entitled to these payments may cause clients to invest in the Value Partners Pools in order to maximize the CL Earnout Payment.  This means that these advisors could be perceived to have a conflict of interest when they recommend that you invest in the Value Partners Pools.   The CL Earnout Payment is not intended to influence behavior of our executives or advisors nor does it incent advisors to make recommendations of related mutual funds  – it is designed to ensure the consistent performance of the VPGI business during the earnout period.  

Nonetheless, this is a conflict of interest that we control in the best interests of our clients. We disclose whether your advisor is entitled to participate in the CL Earnout Payment and have you confirm being informed of this before you set up an account with us and when you invest in the Value Partners Pools. We also ask our advisors to attest annually whether the prospect of receiving the CL Earnout Payment is material to them and that they have complied with all applicable securities rules, including making suitability assessments for you during the year.   The controls described above around recommendations to invest in Value Partners Pools and Related Funds will address this conflict of interest as well.  We have instituted a robust oversight and monitoring process that will review, monthly, the use and level of Value Partners Pools and Related Funds in applicable advisors’ client portfolios to assist in evaluating whether the potential conflict arising from the CL Earnout Payment is being addressed in the best interests of clients. In all cases, your advisor, if entitled to the CL Earnout Payment, will only recommend that you invest in the Value Partners Pools or the Related Funds if they have determined that such an investment is suitable for you based on a number of factors, including your personal and financial circumstances and risk profile and whether your advisor considers such an investment is in your best interests.

Proprietary and Non-Proprietary Divisions – Compensation to LP Financial – Mutual Fund Investments

When you purchase or hold a mutual fund through LP Financial, LP Financial may receive a commission at the time of the sale and may also earn an ongoing commission (also known as trailer fee or service fee) for as long as you hold the fund.  These sales commissions and ongoing commissions are paid to LP Financial by the manager of the funds.  For mutual funds that are distributed publicly under a prospectus, there is full disclosure of these payments in the Fund Facts documents and prospectus documents of the funds.  The various fund managers within the PFC Group  pay compensation to LP Financial described in the related funds’ prospectus in respect of investments recommended through its non-proprietary division in the same way as it pays any other dealer. 

VPI may provide marketing, educational, and operational support, and pays an annual fee for services provided,  to LP Financial in respect of its proprietary division, which is consistent with our role as a principal distributor of the Value Partners Pools and our proprietary division’s focus on the Value Partners Pools.

LP Financial offers a range of mutual funds offered by different fund managers and carries out due diligence on these funds to ensure that there is a reasonable range of alternatives to offer its clients.  LP Financial also ensures that you receive the services from our advisors that are commensurate with the service fees we receive from fund managers.  Our advisors recommend the mutual funds that they consider suitable for you based on your investment objectives and financial circumstances and not based on compensation payable to LP Financial or themselves.

Compensation of advisors  

 We compensate our advisors by paying them a percentage of the sales commissions and trailer fees or service fees received.  Our advisors may also receive compensation or benefits based on referrals to other firms or individuals.  We address the conflicts inherent in the compensation and incentives received by our advisors by ensuring that the compensation they receive properly rewards them for putting your interests ahead of their own.

Different products may have differing levels of compensation, and different account types (fee-based and transactional) may have differing fees.  We attempt to provide compensation structures that don’t provide an incentive to recommend one product over another, and if, through our regular review of advisor recommendations, we find an advisor is consistently using products that pay a higher amount, we will investigate the reasons and rectify the situation if warranted.

Advisors – financial planning, tax planning, and insurance services: Your advisor may also provide you with other services such as (insurance services, tax planning or financial planning) and may represent separate groups of companies for each purpose.  As such, you may be dealing with more than one company depending on the products purchased or services rendered. The remuneration you pay to your advisor may also vary depending on the particular products or services purchased.   We require our advisors to provide you with the name of the entity they represent while conducting related business and/or other business activity.  Some of these entities will be corporations owned in whole or in part by our advisors.

Any activities completed by your advisor outside of LP Financial are not the responsibility of LP Financial. 

Other Outside Activities: At times, our employees and advisors may participate in outside activities such as participating in community events, pursuing personal outside business interests, or serving on a board of directors of a charity.  Before engaging in any outside activity, our policies require these individuals to disclose situations where a conflict of interest may arise and to determine how such conflicts may be addressed.  Our advisors may only engage in such outside activities if approved by LP Financial.  The approval may be subject to terms and conditions that help address perceived or actual conflicts of interest.  Our employees are also required to annually confirm their outside activity to their supervisors to ensure accuracy and completeness.

LP Financial does not allow any of its employees or advisors to engage in activities outside the scope of their duties, including serving as a director of a company or other entity, without first ensuring that such activities are reported to and approved by LP Financial and by our regulators and do not compromise the interests of our clients.

Gifts and Entertainment: Our employees and advisors are not permitted to accept gifts or entertainment beyond what we consider consistent with reasonable business practice and applicable laws.  We set maximum value thresholds for permitted gifts and entertainment to avoid any perception that the gifts or entertainment will influence decisions made by the individuals.

Personal Trading: Our policies and code of ethics require our advisors to act in accordance with applicable laws that prohibit insider trading, front running, and similar conduct.  Individuals may be required to obtain prior approval before making trades in their personal securities accounts.  In addition, our employees are prohibited from accessing non-public information for their direct or indirect personal benefit.

Personal Dealings with Clients: Our employees and advisors may have additional relationships or dealings with our clients from time to time.  Conflicts of interest can arise where such an individual has personal financial dealings with you, such as acquiring assets outside of your investing relationship, borrowing money from or lending money to you, or exercising control over your financial affairs.  LP Financial has policies and procedures that prohibit personal financial dealings with clients who are not family members to address these conflicts.

Referral Arrangements: Referral arrangements may exist between LP Financial and affiliated companies, such as VPI or other regulated entities. A referral arrangement happens when a prospective client is referred from LP Financial by a party, and that party or LP Financial may receive a referral fee.  The purpose of referrals is to introduce our clients or potential clients to qualified persons who are best suited to help them achieve their financial objectives.

If a referral arrangement is in place, a written disclosure will be provided to you with the specific details of the arrangement, including:

• the name of each party to the referral arrangement,
• the purpose and material terms of the referral arrangement, including the nature of the services to be provided by each party,
• any conflicts of interest resulting from the relationship between the parties to the referral arrangement and from any other element of the referral arrangement,
• the method of calculating the referral fee and, to the extent possible, the amount of the fee,
• the category of registration of each registrant that is a party to the agreement, with a description of the activities that the registrant is authorized to engage in under that category and, giving consideration to the nature of the referral, the activities that the registrant is not permitted to engage in under that category.

LP Financial has entered into a written referral arrangement with VPI regarding its portfolio management business, known as Value Partners Investment Counsel (VPIC).  Our advisors may refer clients who may best be suited to open a discretionary managed account with VPIC.  VPI pays us a referral fee equal to 50% of the management fees any referred client agrees to pay VPI for their services.  This fee is paid to us for so long as the referred client maintains an account with VPIC.   If an advisor is entitled to the CL Earnout payments (described above),  you may be concerned that the referral is being made to maximize the CL Earnout payments and puts the advisor in a conflict of interest position.  LP Financial will monitor for any inappropriate referral to VPI and VPIC will only open an account for you if it considers it is in your best interest and suitable for you.  Neither LP Financial nor your advisor will have any decision making for your VPIC account once it is opened.