What the budget did not contain

But beware! Contrary to the preconceived idea of ​​many, the purpose of this measure is not so much to defer taxes as to respond to two glaring imperatives: to allow the development of the next generation of financial services and to restore tax fairness to professionals in the field.


Incorporation in the field of securities does not exist at the level of the professional exercising one of the disciplines of this sector.

Indeed, incorporation is defined, for a professional, to exercise his professional activities through a joint-stock company, commonly called a company. It is therefore the latter which receives the income generated by the professional’s activities, assumes the expenses and pays the salaries, dividends or other emoluments to the professional.

Historical review

The collective savings discipline was, from 1998 to 2009, under the aegis of the same law that governs the insurance and financial planning sectors: Act respecting the distribution of financial products and services (LDPFS).

A practice that already existed in the 90s has therefore become widespread: commission sharing.

Indeed, for the professional holding more than one certification, it was both simpler and more efficient to collect all the income from his activities (personal insurance, financial planning and collective savings) within the same legal person: his cabinet.

The latter could then take care of all the expenses, thus making the organization at all effective and efficient.

The transition from the discipline of collective savings to Securities Law in 2009 overshadowed this possibility since sharing was no longer explicitly permitted, which was confirmed by the Autorité des marchés financiers in January 2016 in a staff notice that caused a stir.

So much so that the Minister of Finance at the time, Carlos Leitao, introduced in his Omnibus Bill 141 a provision restoring the possibility of sharing commissions generated in collective savings with a firm registered under the Distribution Act.

The great forgotten part of commission sharing: succession

If sharing makes it possible, in theory (read this text to the end), to rediscover this simplicity and this efficiency in the organization of the life of the professional and his organization, it leaves aside an issue that has been gaining in importance since several years: the next generation in the financial sector.

In fact, it’s no secret. Our sector is aging, the next generation is difficult to recruit and it will struggle, for lack of sufficient staff, to cope with the massive departure of many experienced advisors over the next ten years.

Add to this that the purchase of a block of customers in collective savings is not a simple or effective operation, especially from a tax point of view.

In fact, the buyer, often a start-up succession advisor with more modest incomes, must, in addition to concluding the negotiation for the purchase transaction, find financing to complete it.

This financing is obtained on the basis of personal income: income from commissions as a self-employed worker. The anticipated increase in revenue from the acquired goodwill is difficult or impossible for most creditors to recognize. They therefore remain cautious or agree to lend at less advantageous rates and conditions, which complicates everything for the succession advisor.

If he obtains the desired financing and the transaction proceeds, the succession advisor will have to repay his loan from his personal net income. Let us specify here that the net income of an individual and that of a company are not equivalent. The succession advisor therefore finds himself with a debt service that occupies a much heavier proportion since a greater part of his net income is allocated to it.

All of this taken into account forces one conclusion: many succession advisors will not be able to acquire the blocks of clientele for sale or will have to be content with a fraction of them.

The risk of a breakdown or a gap in customer service is real and, from a public policy point of view, this deserved the attention of the Minister in his last budget. Any measure that will help the next generation by removing artificial obstacles is both necessary and welcome.

The great problem of non-incorporation: inequity

Personal insurance, damage insurance, financial planning, doctors, lawyers, notaries, accountants… the list is long and includes just about everything that Quebec has in terms of professionals, whether they are governed by the Professional Code or not.

Collective savings are forgotten. Almost the village idiot.

We give the incorporation to all the others but not to the collective savings. For no good reason either. We just forgot about it and we make sure we don’t think about restoring equity.

Basically, in our society and our system, what are fairness, competitiveness, the chance to advance on equal terms and that the best triumph thanks to their talent and their work rather than thanks to their advantages?

I will wait for the Minister’s response to judge…

The urgent problem: Revenu Québec’s appetite

From a frustrating and unfair situation, we come to an urgent and detrimental situation.

In fact, Revenu Québec has, despite the clarity of the Securities Law and its regulations allowing for the sharing of commissions and despite its own written opinion, of which it is now making an original interpretation, to say the least, undertook to contribute to mutual fund representatives on the basis that income shared with their firms should have been charged personally.

Disputes are in progress and have their chances of success. But in the meantime…

One still wonders where is the legal principle that the Tax Act is incidental to the specific laws of application.

We still wonder, if Revenu Québec’s interpretation is correct, what was the purpose of the amendment to the Securities Law.

Finally, we are still wondering, when honest advisers wanted to play by the rules of the game and are being solidly assessed for tidy sums, what the minister is waiting for to clarify the situation, sound the end of Revenu Québec’s recess and /or allow the incorporation of representatives in collective savings which would finally settle, once and for all, this issue.

In conclusion, the budget was a missed opportunity and the upcoming election year will allow little legislative progress. It will therefore remain to take up the pilgrim’s staff, the pen, the megaphone or any other means to make ourselves heard by the minister and the benefits of settling this once and for all.

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