PS Case Study $3-$ Sharon

Professional Standards & Ethics Case Study # $3$

Click here to open the Code of Conduct Explanatory Notes

Case Study: Sharon

Sharon has been an advisor in a small town for $30$ years. Tina and Steve have been Sharon's clients for $10$ years shortly after they were married and bought their first home together. They bought term life insurance policies to cover the mortgage, which had a $25$ yr amortization and $$900,000$ owing. Tina decided to pay the premiums for both policies since her income was higher than Steve's, but they are respective owners of their own policies. Tina is a Landscape Architect for the city and Steve is an Engineer for a mining company, and both have good group benefits including health and disability insurance and RRSPs$.$ Eight years ago, they had a daughter and six years ago they had a son.

Six months ago, they told Sharon that they are divorcing. Sharon asked them how they would like to continue with her. Tina suggested that she could remain as her client since it was Tina who originally met her. Sharon asked Steve if he knew another advisor he could switch to in order to avoid a potential conflict of interest situation in the future. Steve didn't know anyone else and asked if she would make an exception and keep both as her clients. Sharon felt uncomfortable saying no and agreed to keep both Tina and Steve as clients.

Tina and Steve told Sharon that they were still finalizing the written separation agreement, but in the meantime, they had agreed that Tina would stay in the principal residence and have primary custody of the kids since Steve was travelling a lot for work. Steve rented an apartment. They also agreed that Tina would continue to pay for Steve's premiums and they would remain as each other's beneficiaries. Should one of them pass away, the life insurance proceeds would be used to cover education expenses and the remainder of the mortgage.

One month ago, Sharon's long time Life Licensed Assistant, Kilee, received a phone call from Steve stating that Tina has agreed that Steve should change his beneficiary, and he asked her to send him a beneficiary change form. Kilee had worked with Steve and Tina before and she sent the form to Steve. He sent it back to Kilee with the request to change the beneficiary to his girlfriend Lisa. Kilee went ahead and sent it to the insurance company. After she sent it$,$ she talked to Sharon and told her what had happened, and updated her file accordingly.

Ethical Analysis

What's the dilemma?

Question $6(1$ point$)$

Listen

$2\mathrm{.}1$

In considering keeping both Steve and Tina as clients, which of the following would provide guidance to Sharon?

Question $6$ options:

a$)$ Principle $1$: Priority of Client's Interest

b$)$ Principle $4$: Diligence

c$)$ Principle $5$: Disclosure

d$)$ All of the above

Question $7(1$ point$)$

Listen

$2\mathrm{.}2$

With respect to the verbal agreement to pay premiums, which of the following principle$($s$)$ might Sharon have violated by not suggesting that Tina and Steve change the policy ownership to Tina or joint between Steve and Tina?

Question $7$ options:

a$)$ Principle $6-$ Professionalism & Principle $8-$ Respect for the Law

b$)$ Principle $4-$ Diligence & Principle $5-$ Disclosure

c$)$ Principle $7-$ Confidentiality

d$)$ Principle $2-$ Integrity

Question $8(1$ point$)$

Listen

$2\mathrm{.}3$

If Tina has primary custody, Steve should be paying support, and as such their life insurance needs have changed beyond education and mortgage protection. Which of the following might Sharon have violated by not reviewing their insurance needs at this time?

Question $8$ options:

a$)$ Principle $5-$ Disclosure

b$)$ Principle $7-$ Confidentiality

c$)$ Principle $4-$ Diligence

d$)$ Principle $8-$ Respect for the Law

Question $9(1$ point$)$

Listen

$2\mathrm{.}4$

Why is Sharon in a perilous situation?

Question $9$ options:

a$)$ She did not act competently allowing Kilee to take instructions

b$)$ Both Steve and Tina should have found alternate advisors

c$)$ She handled Tina and Steve's situation the best she could

d$)$ She should have restructured the couple's insurance policies

Question $10(1$ point$)$

Listen

$2\mathrm{.}5$

What earlier decisions should Sharon have made to avoid this situation?

Question $10$ options:

a$)$ Notifying Kilee to forward any instructions from Tina or Steve to her before doing anything

b$)$ Refusing to keep Tina and Steve as clients as long as one of them is paying premiums for the other's insurance

c$)$ Suggesting Tina and Steve to seek counselling to avoid the separation

d$)$ Refusing to let Steve and Tina have separate insurance policies