Client Relationship Model (CRM2)

A more detailed view of your investment performance and the fees associated with it

January 18, 2017

A new client referral was in our office recently and we were exploring the fit between their goals and our approach. One of the concerns the client highlighted was the lack of transparency regarding the amount of fees they had been paying; were they fully disclosed and what value were they receiving from the Advisor for the fees paid? After completing an audit of all the fees associated with running the account, this individual was shocked to see the full amount of costs associated with their account. They were unable to articulate the value they received.

Thankfully, with new regulation, some of this will now be easier to understand!

As we reported last year (see our blog post, May 13, 2016) the Client Relationship Model 2 (CRM2) is an initiative launched by the Investment Industry Regulatory Organization of Canada (IIROC) and other industry regulators to:

  • Create a new standard in performance reporting.
  • Help clients fully understand the costs associated with investing.

We welcome it. The Wooding Group has disclosed net performance measures and costs to our clients for a long time, so any initiative adding to the level of transparency relating to investment performance and fees meets with our enthusiastic support.

For the purposes of this blog, we’ll examine how reporting will change in light of CRM2. Your year-end account report will include text, tables and charts that explain:

  1. How your account’s market value has changed.
  2. How your account has performed, net of costs.
  3. The fees you paid.
  4. The fees paid by others in connection with your account.

The monthly or quarterly statement you receive now shows you any fees that you paid to CIBC Wood Gundy in that period. That will not change. The new year-end account report will show you all of the fees that CIBC Wood Gundy received over the year in connection with your account, and it will include amounts received both from you and possibly from other parties.
For example, if you incur a transaction fee (perhaps buying or selling a security) that cost will appear on your regular statement, as it does now, and will also be included in the transaction fee total on the year-end account report.

A trailer fee on the other hand, is a payment that CIBC Wood Gundy has received from a mutual fund company to assist with the management of your account. This will now appear on the year-end account report in a section called “Fees Paid By Others.”

Another difference is that any fee you pay that is reported on your regular statement as a percentage of your account balance will appear on the year-end account report in dollars. This will give you a better idea of what your investments are costing you. Remember that your investment performance has always been reporting “net” of Advisory costs and that will not change.

Transparency between the Advisor and those we advise is fundamental to our practice. As a result, we welcome the introduction of CRM2 as a step forward for the investment advisory industry as a whole.

If you or anyone you know has questions about the implication of this change, please feel free to contact us directly, we are always happy to hear from you!

The Wooding Group