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.

The non-proprietary division of LP Financial offers a range of mutual funds available in Canada to meet the financial needs of our clients.  We are also the principal securities distributor of the mutual funds (the Value Partners Pools) of our affiliated investment fund manager, Value Partners Investments Inc. (VPI).  We have a proprietary division through which our advisors primarily recommend securities of the Value Partners Pools.

We are committed to ensuring that the interests of our clients always have precedence.  As a mutual fund dealer and member of the Mutual Fund Dealers Association of Canada, 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 our affiliate VPI and our parent company, Value Partners Group Inc. (VPGI).

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.

Focus on Value Partners Pools by the Value Partners Private Wealth Division of LP Financial

If your advisor is associated with the Value Partners Private Wealth 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.  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 our advisors who do not have a material interest in our parent company, VPGI. The Investment Product Committee will monitor the Value Partners Pools and the other mutual funds available through the non-proprietary division of LP Financial.
• 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.

Recommendations to Invest in Value Partners Pools within Our Non-Proprietary Division

If your advisor is associated with our non-proprietary division, they may recommend that you invest in the Value Partners Pools when they could recommend other non-proprietary mutual funds.  Given our affiliation with VPI, recommending a Value Partners Pool 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 Value Partners Pools over non-proprietary mutual funds. In other words, your advisor has no incentive by the form of compensation to recommend the Value Partners Pools over any other mutual fund.

Advisors with Ownership Interests in our Parent Company, VPGI

Advisors may hold shares in our parent company, VPGI.  Three advisors, who were the founders of VPGI, own less than a combined 17.00% of the outstanding shares of VPGI.  All other advisors who own shares in VPGI own less than a combined 15.00% of the outstanding shares of VPGI, with no one advisor owning more than 1.50%.

Advisors who hold shares in VPGI stand to benefit from the inflow of client money to the Value Partners Pools, albeit to varying degrees, and in many instances not in a material way in relation to the advisor’s other income or net worth. This means that these advisors have a conflict of interest when they recommend that you invest in the Value Partners Pools.  However, being a shareholder provides advisors with some influence by way of director appointments over the management of VPI and the Value Partners Pools.  In addition, shareholdings in VPGI by advisors provide a means of supervision and control over how investors, such as yourself, are treated and how your money is managed.  This has led to positive outcomes for investors, including competitive fees and full transparency of holdings and investment decisions.

Nonetheless, this is a conflict of interest that we control in the best interests of our clients. We disclose your advisor’s ownership in VPGI when they recommend any Value Partners Pool and have you confirm being informed of this before you invest.  We also ask our advisors to attest annually whether their ownership of shares in VPGI is material to them.  The controls described above around recommendations to invest in Value Partners Pools will address this conflict of interest as well.  In all cases, your advisor, if a shareholder in VPGI, will only recommend that you invest in the Value Partners Pools 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.  A recommendation to invest in the Value Partners Pools will be made only if your advisor considers such an investment is in your best interests.

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.  VPI pays compensation to LP Financial described in the Value Partners Pools’ 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 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 divisions’ 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 VPI.