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COVID-19 turned what was an inconvenience into a serious issue for advisors looking to open new client accounts. But new rules for e-signatures now make it possible to exchange documents in minutes.

ilkercelik/iStockPhoto / Getty Images

Financial advisors in Ontario who have been working from home during the COVID-19 pandemic received a little help from the provincial government, which changed the rules around electronic signatures (e-signatures), removing a cumbersome barrier that had slowed down the client onboarding process.

The Ontario government’s Bill 190, which amended section 51 of the Succession Law Reform Act, received royal assent on May 12. (A consequential amendment was also made to the Pension Benefits Act as part of the bill.) In effect, the new law explicitly allows clients to designate beneficiaries for a range of registered accounts – including registered retirement savings plans, registered retirement income funds, locked-in retirement accounts, life income funds and tax-free savings accounts – with e-signatures.

Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA) already accommodated the use of e-signatures, but there were exceptions for some documents, says Paul Bourque, president and chief executive officer of the Investment Funds Institute of Canada (IFIC). “[This rule didn’t] apply to testamentary instruments like wills.”

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Although the language in the rules didn’t forbid e-signatures explicitly in designating beneficiaries for registered accounts, it didn’t explicitly allow them either. As a result, Mr. Bourque says, “the cautious approach has been to designate a beneficiary of a registered plan using a manual signature.”

E-signatures make it possible to exchange documents in minutes with clients, but this lack of clarity over designating beneficiaries via e-signatures for registered plans threw a wrench into the process, says Matthew Latimer, executive director of the Federation of Mutual Fund Dealers (FMFD), which had been lobbying the Ontario government for this change along with IFIC.

“When advisors have to mail clients a paper application to sign and then have clients mail it back to them because they need the original, that just slows business down,” he says.

The COVID-19 crisis turned an inconvenience into a serious issue for advisors looking to open new client accounts as anything that slowed down the client onboarding process exacerbated an already difficult situation, Mr. Latimer says.

Now that the law has clarified the rules for e-signatures for designating beneficiaries, Mr. Latimer expects many dealers will be able to support this change rather easily.

“It’s my understanding that most e-signature platforms that are available already include the ability to designate beneficiaries electronically, so that part shouldn’t be a huge hurdle,” he says.

Sterling Mutuals Inc., an independent mutual fund dealer, has supported e-signatures for a year now on OneBoss, a back-office system that the firm’s CEO, Nelson Cheng, had designed. However, the ability to manage e-signatures for testamentary dispositions was disabled on the platform.

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“All we had to do was turn it on. It took us five minutes because we already had the system built,” he says, adding that the regulatory change will have a big impact on advisors. “It’s a huge time-saver. It just makes your business easier to run.”

The clarification around e-signatures for beneficiaries in Ontario is part of a bigger effort to reduce the regulatory burden on the investment industry, Mr. Bourque says. He adds that British Columbia had already updated its laws and he would like to see other provinces follow suit, clarifying the language on e-signatures for beneficiaries nationwide.

“That’s necessary to assist firms with a national footprint, which are doing business across the country,” he says.

Beyond that, there’s still more work for regulators to do in the push to reduce the regulatory burden for advisors and their dealers, most of whom are still expected to work from home for some time, Mr. Bourque says.

Although disclosure documents, investment fund performance reports and financial statements can be made available to clients online, a notice must be sent manually to clients every year so they could confirm that they’re happy with the electronic delivery. He’d like to see that requirement removed.

Mr. Latimer is also hoping for more permissiveness around electronic documents. He points out that e-signatures are still not expressly allowed for estate-settlement documents and spousal consent waivers for locked-in plans, among others.

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