Tag: CRM2

Investment Series: the Client Relationship Model II


Protecting your assets involves more than the right insurance policy. Today on the blog, we bring you an article by investment advisor Rob Bradshaw that looks at some changes happening in the investment industry of which all investors need to be aware. 

There are some regulatory reporting changes coming to the Canadian investment industry that are meant to provide investors with more details of the costs of their investment advice and how their investments are performing.  The investment regulators want to ensure investors receive sound fee disclosure to avoid any conflict of interest between the advice your advisor provides and the solutions you need.

So how does this affect you?

The most noticeable result of the new regulation (called the Client Relationship Model II or “CRM2”), will take the form of two new reports that most investors in Canada will receive by early to mid-2017. These reports will provide you with two key pieces of information.

The “Cost” report details the costs paid to your advisor firm for providing advice and service on your investments. This includes costs you may pay such as: fee-based account costs, commissions, as well as some costs paid by third parties, that have been difficult to discern in dollar values, until now.

It is important to note what is not included in these Cost reports: most insurance products, and in some cases, segregated funds, are not being reported. Also, if you own a mutual fund, you should be aware that the annual fee you pay (the management expense ratio or “MER”), is also not shown in the reports— only the portion of the MER that the advisor firm receives for advice and service, called the “trailing commission” will be disclosed.

The “Performance” report provides you with a “money-weighted rate of return”, different from the more commonly used “time-weighted rate of return”; and interestingly, going forward the report will show the return for 1, 3, 5, 10 and since inception time periods, as they become available.

With this additional transparency on costs and performance of your account, you may ask “What value am I getting from my advisor for the costs I pay and am I progressing towards my goals?” Your current advisor should be able to answer those questions clearly, if not, talk to someone who can. As an investor you should have a clear understanding of the costs and performance associated with your investments and the value you are receiving from your advisor.

Enhanced transparency that CRM2 will bring to our industry is positive for you as an investor as it enables you to have a clear understanding of how you are progressing towards your financial goals.

Rob Bradshaw is an IIROC licensed advisor in Aurora, at RBC Dominion Securities, has over a decade of experience in financial markets; focusing on portfolio solutions and financial plans for affluent families and professionals. He can be reached at robin.bradshaw@rbc.com.