The Canadian investment community is quickly gearing up for upcoming legislation called the Customer Relationship Management Model, Phase Two (CRM2) that since announced, has caused financial advisors to re-think how they do business. This means that as of July 15, when the legislation kicks in, money managers will need to be more transparent about fees charged to your account.
Perhaps your advisor already discloses their fees in dollar amounts. Or, you are a customer that keenly keeps an eye on the numbers and consistently asks for a break-down of fees. Either way, this is always the best practice. If you’re new to investments, CRM2 is a handy piece of information that essentially lets you know exactly what you are paying for in a way you can understand.
But upcoming changes are more than just about fees. Here’s a breakdown of what you should expect from an advisor.
What to expect with CRM2 beyond fee breakdowns
Two new annual reports:
- Annual performance report
- This report will summarize how your investments performed over various standard measurement periods.
- Annual charges and compensation report
- This report will itemize the cost of everything you pay for; from embedded trailer-fee commissions, to redemption fees, point-of-sale commissions, switching fees and RRSP administration fees, as well as provide an aggregate dollar figure for the 12-month period.
*Note: Although these laws become effective July 15, 2016, advisors have until 2017 to produce these reports to you.
What’s the point of all this?
The industry is shifting its focus to clients and consumers. These changes will help ensure you know what you’re paying through each transaction. Figures will be presented in dollar figures versus percentages. For those already in investments: be warned you might have initial sticker shock when you see the dollar figures for the first time.
Of course, it’s important not to overpay, but your focus for planning for the future should be on value, not just sticker price. Give your advisor an opportunity to explain the fees to you. Chances are, you already have a good idea whether or not you’re happy with their service.
How to get better value from your financial advisor
Try making a list of what your financial goals are, and what services are important to you. Saving for your children’s education, for example, would be a financial goal. Being able to call your advisor for quick advice would be a service. There are many different types of advisors and client-advisor relationships. Figure out what needs you have and write them down.
Next time you meet with your advisor, keep track of your checklist benchmark and you’ll have a much better idea of whether or not you’re receiving the value you deserve.
Click here to find out more about how you can make sure you have the right financial advisor. For more details on CRM2, click here.