Nancy Graham CPA, CA, CIM, CFP, TEP

Portfolio Manager
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CRM2 Performance Reporting: Your Personal Rate of Return

In our spring post, “Getting to the Heart of the Client Relationship Model,” we defined the primary goals and timeline set by the investment industry regulators for the Client Relationship Model Phase 2 (CRM2).* Today, let’s take a look at the resulting performance report, based on your personal rate of return (ROR).

As the name implies, your personal ROR captures your unique investment performance, after accounting for trading and investment management costs. This should provide you with a better idea of how you are specifically doing, compared to your investment goals. That’s good, because it helps to know where you stand in pursuit of your own financial aspirations. If you’re falling short of or exceeding your expectations, you can adjust accordingly.

That said, your personal ROR is a poor way to see how you are doing compared to the market. If you’ve under- or outperformed a standard benchmark, it may have more to do with the timing of your particular deposits and withdrawals than any meaningful “success” or “failure” of your strategy.  

To illustrate this notion, say you’re an Ottawa Senators fan. A report on the Senators’ overall season stats would likely differ dramatically from the same stats that reflected only the games you attended. Your personalized report would tell you how the Senators fared when you were there to cheer them on, but without more information, it would not tell you how that performance compared to the rest of their season. 

To know where you stand in relation to market returns, PWL continues to provide your time weighted returns. This is the performance reporting methodology set by the Chartered Financial Analysts Institute and is considered the industry standard. The return we report is for your overall portfolio of accounts and can be used to compare to broad market benchmarks of performance. 

It helps to have an advisor who can help you put all this in context with clear and complete explanations of all of the above. Only then can you put your financial picture in its proper context.       

* Since our spring post on CRM2, the Canadian Securities Administrators has extended portions of the new reporting requirements from July to December 2016, as described in this Globe & Mail piece. We hope that will be the last extension granted. After the dust settles, you can expect to actually see updated reports start to roll out in early 2017.                                                    
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