Terms of Engagement: Guidance for the Profession and the Public

The purpose of this notice is to provide guidance to FP Canada Certificants and members of the public regarding Terms of Engagement documents.

The Terms of Engagement is a document that sets out the agreement between the professional financial planner and the client(s), at the outset of the engagement. The use of a Terms of Engagement document, while not mandatory, may help ensure that CFP^® professionals and QAFP^® professionals are compliant with their disclosure obligations as outlined in the FP Canada Standards Council™ Standards of Professional Responsibility. While not required, the creation of a formal Terms of Engagement Document is considered best practice.

The purpose of the Terms of Engagement document is to:

• Establish clear and appropriate expectations for the client(s) and the financial planner;
• Help ensure mutual understanding and agreement;
• Promote shared responsibility, commitment and accountability for the success of the engagement; and
• Establish consistency of service delivery and raise client confidence.

The Terms of Engagement should include:

• The specific financial planning services the planner will perform for the client(s);
• Any information that the client(s) might reasonably want to know in establishing the scope and nature of the relationship, including information about the planner’s areas of expertise and qualifications;
• An accurate and understandable description of the known costs of the services and products to the client(s);
• Any contingency or referral fees received by the Certificant or the Certificant’s employer or firm, in relation to services provided to the client(s);
• A general summary of potential conflicts of interest between:
  • The client(s) and the planner;
  • The client(s) and the planner’s employer, affiliates, or any third party including but, not limited to, information about any familial, contractual or agency relationship; and
  • In the case of a joint engagement, the clients themselves;
• Any information about the planner or the planner’s employer that could reasonably be expected to materially affect the client relationship/engagement;  
• Contact information for the planner and, if applicable, the planner’s employer, firm or sponsor;  
• Any financial Planning assumptions¹ used in making recommendation and/or preparing a financial plan; and
• The planner’s and the client’s signature attesting to their mutual agreement and acceptance of the terms of the engagement.

A Terms of Engagement might also include these optional clauses:

• An assurance to protect the client’s confidentiality and (where appropriate) the client’s specific written consent permitting the planner to share information with identified third parties including, for example, members of the planner’s firm or a trusted contact for the client;
• Financial planning assumptions;
• Client responsibilities;
• Naming of a Trusted Contact Person² (“TCP”)
• Termination provisions; and
• How to file a complaint.

As a relationship with a client(s) may extend over a number of years and as the scope of the services offered may change over time, financial planners should review the Terms of Engagement document on a regular basis (for example, during annual client meeting) to ensure it remains current. This regular review process will ensure that the financial planner and the client(s) remain aligned in your understanding of the scope of the engagement and provide a natural opportunity to update any terms that may require updating.

¹ Financial planning assumptions may include, among other things: rates of return; the client’s anticipated life expectancy; the client’s anticipated retirement age; inflation; government benefit entitlement and planning priorities. Material assumptions should be documented and discussed with clients to ensure they understand them and are comfortable with their use.

² As of June 1, 2024, Certificants are required to inform their client(s) of the value of the naming a TCP and shall record, in writing, the client’s decision with respect to naming a TCP. Further information with regards to this requirement can be found here value of naming a Trusted Contact Person. FP Canada has developed a sample TCP form that may be leveraged to fulfill this obligation.

Where a Terms of Engagement document is not provided, it is important to note that CFP professionals and QAFP professionals are still required to meet the disclosure obligations set out in the FP Canada Standards Council Rules of Conduct. In particular, in accordance with Rules 7, 8 and 9 (reproduced below), FP Canada Certificants are required to disclose, in writing: compensation arrangements; potential conflicts of interest³ and information relevant to the FP Canada Certificant’s practice and services. FP Canada Certificants are also required to disclose, in writing, an accurate and understandable description of how the planner and/or the planner’s firm are compensated for providing the products and services including but not limited to any contingency or referral fees. Disclosure must always be provided in writing and done in a timely manner.

³ A conflict of interest – or a potential one – exists where the duties and loyalties a certificant has to their clients could be affected by the duties or loyalties they have either to a third party, or by their own interests.

The Standards of Professional Responsibility include the following Practice Standards and Rules of Conduct⁴:

⁴The applicable Practice Standard and/or Rule of Conduct may change in the event of updates to the Standards of Professional Responsibility. To ensure you are familiar with your professional obligations please review the most current version of the Standards of Professional Responsibility published here.

Within the FP Canada Certificant portal, there is a Terms of Engagement Tool that Certificants can leverage to assist in complying with the FP Canada Standards of Professional Responsibility. Use of this Terms of Engagement Tool is not mandatory, but financial planners may find it helpful as a reference or starting point. These resources are intended to help professional financial planners in managing their practices and meeting their professional obligations relating to disclosure within the FP Canada Standards of Professional Responsibility. The tool provides a wide range of sample clauses, so that certificants can customize their letters. The samples include clauses that relate to conflict of interest, and to compensation, fees and costs.

The sample Terms of Engagement documents generated by the tool are intended as a starting point; they may need to be amended to suit the styles, needs and circumstances of the financial planner and the particular engagement and client(s). Financial planners must exercise professional judgment respecting the correctness and applicability of the clauses. Sample clauses are not intended to replace the financial planner’s firm’s contracts, agreements or other legal or regulatory documents which may be required.