Conflict of Interest Disclosure
Milestone Wealth Management Ltd. (“Milestone”, the “Firm”, “we” “our”, “us”) is providing you with this Conflict of Interest Disclosure in accordance with new laws that come into force on June 30, 2021. This document describes existing or reasonably foreseeable material conflicts that may affect your interests as our client, including how we address those conflicts in your best interest.
You should refer to Milestone’s Relationship Disclosure Information document for other information that you may find important about your relationship with us including but not limited to, the services we offer, the fees and expenses we charge you and the risks that you should consider when making investments.
A conflict of interest can include any circumstance where:
(a) the interests of different parties, such as the interests of the Firm and those of a client, are inconsistent or divergent;
(b) the Firm or one of its registered representatives may be influenced to put their interests ahead of a client’s interests; or
(c) monetary or non-monetary benefits or disadvantages accrued to Milestone or its registered representatives that might compromise the trust that a reasonable client has in the firm or any of its registered representatives.
Whether a conflict is “material” or not depends on the circumstances. In determining whether a conflict is material, we will typically consider whether the conflict may be reasonably expected to affect the decisions of our clients in the circumstances, and/or the recommendations or decisions of the Firm or its registered representatives in the circumstances.
What follows below are details regarding the specific material conflicts of interest that we have identified to date. In case other material conflicts of interest arise, which may happen from time to time, we will inform you of the nature and extent of any such other conflicts of interest prior to any of your subsequent transactions with us or our advice to you.
1. Third Party Compensation
Milestone will typically not recommend securities products that in turn provide compensation to Milestone. However, when such products are in the best interest of the client, Milestone may make such a recommendation from time to time. Specifically, Milestone may recommend certain funds and ETFs that provide trailer fees or a commission back to Milestone.
Absent appropriate controls, clients may perceive a Milestone recommendation as being driven by third party compensation as opposed to what is appropriate for the client. Milestone takes the following steps to mitigate the actual and potential conflicts of interest described above:
2. Internal Compensation Arrangements
Milestone could be perceived as being motivated by the Firm to encourage a client to expand its services with the Firm. Specifically, Milestone’s compensation is based on its assets under management and accordingly the Firm could incentivize its employees to increase a client’s investment portfolio to collect higher fees. Furthermore, Milestone has a service provider relationship with Purpose Advisor Solutions Inc. (“PAS”) that charges Milestone a cost for utilizing their technology platform. PAS’s service charge is incrementally reduced based on Milestone’s asset under management exceeding certain amounts. Accordingly, as Milestone’s assets under management increases, its service fees payable to PAS decrease.
Milestone takes the following steps to mitigate the actual and potential conflicts of interest described above:
3. Conflicts at the Supervisory Level
One of the mitigation tools that Milestone uses to control for the compensation conflicts of its employees (see Item 2 above) is a Chief Compliance Officer review of suitability recommendations. However, it may be perceived that the Chief Compliance Officer himself could be conflicted during these reviews in that he also may receive variable bonus compensation. To address this conflict, Milestone has structured the compensation of its Chief Compliance Officer such that any variable bonus compensation represents only a nominal portion of his overall compensation package. Notwithstanding, the Chief Compliance Officer’s compensation structure, as an owner of Milestone, the Chief Compliance Officer has a vested interest in seeing the assets under management of the Firm grow.
4. Referral Arrangements
Milestone does not actively seek out referral arrangements. However, from time to time, Milestone may enter into referral arrangements where we refer clients to a third party for a fee.
When referring a client to a third party, Milestone must ensure that such a relationship is in the best interest of the client. Milestone should not enter into a referral arrangement solely because of the referral fee that they will receive from that party. Furthermore, if a client pays more for the same, or substantially similar, products or services as a result of a referral arrangement, Milestone would not be seen as appropriately discharging its obligations to its clients.
In order to mitigate any actual or potential conflicts, Milestone will bring the referral relationship and the terms of that referral relationship to the attention of the referred client. In addition to client disclosure, Milestone has adopted several procedures to ensure it determines that accepting a referral is in a referred client’s best interest. These procedures include: (i) requiring Chief Compliance Officer approval of any referral arrangement; (ii) conducting due diligence on potential third-party referrers; (iii) ensuring that the referred client does not pay additional fees or compensation for the same service or product provided to other Milestone clients as a result of the referral arrangement; and (iv) keeping a record of all payments related to Milestone’s referral arrangements.
5. Affiliated Firms Providing Other Products or Services
Certain Milestone advisers provide insurance products through Canaccord Genuity and HUB Financial. These advisers are licensed insurance agents through these firms.
The above affiliated companies operate in the financial services sector. Accordingly, it may be perceived that Milestone would be inclined to prefer these related parties over other entities or services which may be a better solution for Milestone clients. As an example, it may be perceived that a Milestone employee would recommend a Canaccord Genuity or HUB Financial product due that employee’s relationship with that firm. Furthermore, Milestone clients may become confused as to whether they are dealing with a Milestone employee in their capacity as a registered employee of Milestone or in their capacity as a broker with another firm.
6. Outside Activities
Milestone’s registered individuals may become involved in other activities outside of their employment with Milestone (e.g., sitting on boards of directors or providing volunteer services for a charity). These outside activities could: (i) impact the amount of time a Milestone registered individual spends on Milestone employment or registration obligation; and (ii) create a conflicting interest as to how a Milestone registered individual discharges its obligations to Milestone or its clients.
Milestone has policies and procedures to ensure that all outside activities are reported to and considered by its Chief Compliance Officer. The Chief Compliance Officer will only approve such outside activities that do not conflict with Milestone operations or obligations.
7. Best Execution
Milestone may hire a brokerage firm to execute trades on behalf of the Milestone mandates based on a pre-existing relationship, rather than objective qualitative or quantitative considerations. This is considered a best execution conflict of interest.
Milestone has policies and procedures to ensure that when Milestone directs brokerage transactions to brokers, the service is comparable to that which Milestone may obtain from other brokers and the fees are equivalent to or better than those that would have been normally charged by the broker. Milestone monitors the level of service provided by any broker retained on behalf of the Milestone mandates with respect to the cost and execution of trades.
When placing orders for and on behalf of clients’ accounts, we will select brokers and dealers from whom we reasonably expect to obtain the best execution (after considering all transactions costs, research or other benefits.) Some brokers and dealers will make available research and trade execution services to us at no cost in exchange for executing a trade with them. This practice is commonly known as “soft dollar” arrangements. The use of these arrangements is permitted under applicable securities laws as long as we determine that the arrangements will be beneficial to our clients. The regulations also define what type of services can be provided to us under a soft dollar arrangement. We have established a policy to assess when a proposed soft dollar arrangement would be beneficial to our clients. Any arrangement to which we agree is reviewed on an annual basis by senior management including the Chief Compliance Officer to ensure that the clients continue to receive a reasonable benefit from the services in relation to the total commission dollars paid.
8. Fair Allocation of Investment Opportunities
Milestone owes its clients a duty to treat each client fairly. This duty must be considered when allocating investment opportunities.
Security purchases and sales for multiple accounts may be grouped and submitted to the market together. The decision to group orders will take into consideration the investment profile of each client. When trades are grouped, each account will generally receive its pro rata share and the same blended price of each fill wherever practicable. In the event that securities are purchased for the accounts of more than one client and an insufficient number of securities are available to satisfy the purchase order, the securities available will be allocated pro rata based on the size of the accounts, to the extent reasonably possible. Trading commissions, if any, will be allocated to client account in the same manner as the security allocation. Allocations for clients will always take precedence over trading for any proprietary accounts or the accounts of our staff. The basic purpose of this policy is to ensure fair treatment of all accounts and to avoid the appearance of favoritism or discrimination. There may be times, however, where strict application of this policy would not lead to a fair, practical and reasonable allocation. In such circumstances, allocation by a method other than this policy will be permitted, provided that such allocation produces a more fair and reasonable result
Proprietary accounts of Milestone and those of any of its employees will not be allocated a pro-rata share of any partially filled block trades or initial public offering of securities.
9. Gifts and Entertainment
While it is recognized that conducting business may involve some modest exchange of gifts and business-related entertainment, the value of such gifts and entertainment must not create a real or perceived conflict of interest and must not impair the independence or objectivity of the recipient.
Milestone has policies and procedures in place with respect to the receipt or giving of gifts and/or entertainment. These policies and procedures require employees to contact the Chief Compliance Officer with any concerns about the receipt or giving of a gift or entertainment and whether that may create a conflict of interest. Further, employees are required to notify the Chief Compliance Officer upon receipt of a gift or entertainment in excess of $250 (on an individual basis).
10. Personal Trading
Milestone abides by a code of ethics which establishes standards of business conduct to prevent possible conflicts of interest between clients and employees, including receiving gifts and entertainment and trading for personal accounts. Every Milestone employee is subject to our personal trading policies and procedures. The policies are intended to ensure that employees do not put their personal interests ahead of our clients. We encourage employees to invest alongside of our clients, but they are controls in place to ensure that they do not take advantage of their knowledge by trading in a manner that is inconsistent with our obligations to clients. Employees who have direct knowledge of client assets like investment advisors, are required to request approval for trades in their personal accounts, or accounts in which they have a beneficial interest, for most securities.
11. Related and Connected Issuers
There is a potential for conflicts of interest to arise in situations in which Milestone advises or trades in the securities of issuers which are related to or connected to us. We are required to disclose to you any related or connected issue in writing, before we make a trade or provide advice to you and, in a timely manner thereafter if there are any significant changes to this disclosure. In addition, we are required to disclose to you whether any security we recommend for you to buy, sell or hold are securities issued by Milestone, a related issuer or a connected issuer.
A person or company is a “related issuer” of another person or company if:
An “influential security holder” controls more than 20% of an issuer either alone or with others.
A “connected issuer” is one that has a connection to a person or company through common shareowners, directors or officers.
As a part of our business activities, we may buy or sell the securities of related/connected issuers on behalf of our clients, exercise our discretionary power to buy or sell these securities pursuant to discretionary management agreements, or make recommendations in respect of these securities. We will do so in accordance with applicable securities laws and always in the best interest of our clients. We maintain a list of related/connected issuers which is updated regularly and is available on our website – www.milestonewealth.ca/legal