The Signed Plan and the Undisclosed Commission
Maria Santos, 46, married with two children, owns a small printing business. She comes to you for a second opinion and brings a 40-page plan prepared by a bank-based licensed agent. The plan recommends a PHP 2.5 million single-premium variable universal life policy, a PHP 1 million education fund in an equity UITF, and no emergency reserve. The agent told her the plan was “free,” but the VUL pays a 4.5% commission. Maria asks you to “just sign the recommendation” because the bank needs an RFP endorsement before releasing a business loan. She also mentions a PHP 600,000 credit card balance that her husband does not know about and asks you to backdate the engagement letter to last month. You are fee-only and have not verified the agent’s data. She wants the endorsement by Friday.
1. Identify the professional-standards issues in this engagement and state what you should do before Friday.
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The issues are scope, due diligence, compensation conflict, confidentiality, and integrity. You cannot sign or endorse another adviser’s plan as your own without testing the data, assumptions, and suitability. The 4.5% commission makes the “free” plan a compensated recommendation; as a fee-only adviser you must disclose your own fee basis and avoid implying an independent verification you did not perform. Backdating the engagement letter is falsification-refuse. The credit card balance is material; omitting it would make the plan incomplete. Tell Maria you can provide a second-opinion review, document the limitations, and ask her to authorize contact with the agent or provide source documents. If she insists on a false endorsement, decline the engagement. On confidentiality, do not tell the husband without Maria’s consent; if the loan involves conjugal property, explain why joint disclosure may be necessary.
2. Outline the process you would follow before endorsing any recommendation in this case.
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Establish the relationship and define whether this is a limited review or a full plan. Gather quantitative and qualitative data, including the omitted credit card debt, cash flow, goals, risk tolerance, and existing policies. Verify policy contracts, fund fact sheets, and loan requirements rather than relying on the agent’s summary. Analyze gaps: emergency fund, insurance adequacy, liquidity, and suitability of a single-premium VUL for a business owner who may need cash. Develop alternatives, including lower-cost term cover or a smaller VUL if life insurance is needed. Present in writing with pros, cons, and conflicts. Implement only after written client acceptance, then monitor. The bank’s Friday deadline is not a reason to skip verification; ask the bank for an extension or issue a limited factual letter that does not endorse suitability.
3. How should you handle the credit card debt with respect to Maria’s husband and the bank?
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Maria is the client, not her husband, so the credit card debt is confidential. However, the debt affects the plan and the loan. Explain that you will not disclose it to the husband without her written consent, but you will not omit it from the analysis. If the loan is a conjugal obligation, the husband may need to sign; help her prepare a joint disclosure. If she refuses to include the debt, document the limitation and consider whether you can provide a competent opinion; if not, decline. Never use the debt as leverage or disclose it to the bank without consent.