CRM 2 The "new" Client Relationship Model

Fri, 2016-12-09

CRM 2 is the client relationship model initiated by the Canadian Securities Administrators that comes into effect January 1, 2017.  It's been a long time coming and a true win for investors, advocacy groups and investment professionals who have fought for increased transparency. 

In essence, all investors will now receive mandated annual reports on the compensation paid to investment firms for advice associated with investment accounts and performance in both percentage and real dollar terms.

For those of us already working under business models that have provided this information this is largely a non-event.  For those investors yet to contemplate what they pay (or still believe that their investments are free) prepare for sticker shock.

It's not difficult to understand why much of the industry fought so hard against the changes or lobbied for extension after extension.   Full disclosure makes for more difficult conversations and encourages the expectation of higher service levels and less expensive alternatives.

Going forward this information should allow investors to better compare competing firms, services and products.  Still, one mustn't confuse more information with education.  While a lower fee structure is generally a good thing the lowest is bypassing all professionals in favour of going it alone.  Statistically, this hasn't proven very successful.  In addition, every discussion of performance is only meaningful over a period of time and when one considers the make-up and risk level of their portfolio.

Today, investment and advocate groups continue the fight on whether to ban all embedded fees on products like mutual funds and on who has the right to call themselves a financial planner.

Those that don't embrace change get left behind.