UPCOMING CHANGES IN THE INVESTMENT INDUSTRY WILL MAKE IT HARDER FOR ADVISORS TO HIDE HIGH FEES AND GLOSS OVER POOR RETURNS. SEVERAL YEARS AGO, REGULATORS ANNOUNCED A SERIES OF NEW RULES REQUIRING MORE DISCLOSURE AROUND COSTS AND INVESTMENT PERFORMANCE. THE SO-CALLED CLIENT RELATIONSHIP MODEL, PHASE 2 (OR CRM2), IS BEING IMPLEMENTED GRADUALLY, WITH MORE CHANGES COMING THIS SUMMER.
The next phase of CRM2 comes into effect on July 15, when dealers will be required to send quarterly statements with greater disclosure about the value of client holdings. PWL is already providing this information to clients regularly. To comply with the new rules, the monthly statements produced through our carrying broker (NBCN) will also begin including book values as well as market values. This update will be in place before the end of the year.
It’s the two changes coming in 2016 that are likely to make the biggest waves. First, starting in July 2016, advisors will need to provide clients with annual reports that summarize all of the costs—in dollars, not percentages—incurred during the year, including management fees, commissions and RRSP
administration fees. In addition, advisors will be required to provide personalized performance reports that tell clients how their investments have done over various periods ranging from one to 10 years.
Not surprisingly, many advisors are shrinking from the light that CRM2 will cast on their practices. We’ve even heard stories of advisors who are locking clients into expensive products before the requirements are phased in, or moving to insurance-based products (such as segregated funds) that won’t be covered by the new rules.
At PWL Capital, we welcome this greater transparency around costs and performance reporting. If you have any questions about what we’re doing to comply with CRM2, don’t hesitate to ask your advisor or portfolio manager.
PWL Capital Inc.