Ashley Mangles

The financial industry has a new regulation – Client Relationship Model Phase II (CRM2) – which requires most investment dealers in Canada to provide two new annual reports to clients on their account fees and performance by early 2017. While these reports provide enhanced details on performance and costs, be aware that not all fees paid are included.

For example, if you hold mutual funds, you pay an annual fee called a Management Expense Ratio (MER). This represents the combined total of the management fees (investment management fee plus trailing commission, where applicable), operating expenses and taxes charged to a fund each year, expressed as a percentage of a fund’s average net assets. Your returns are calculated after these fees have been deducted from the fund.

However, the only portion of this MER which will be shown on the new reports is the “trailing commission” – the part that is paid to your advisor’s firm for advice and service on your account(s). You might wonder what your actual total costs actually are – your current advisor should be able to answer this clearly, if not, talk to someone who can. As an investor you should have a clear understanding of MERs, CRM2, and the value for your fee.

CRM2 is good news for investors, and our industry, because it will result in enhanced transparency and a level of detail on portfolios that many have never seen before. As with all periods of change, however, some questions may arise.

Ashley Mangles is an Investment Advisor at RBC Dominion Securities (member–Canadian Investor Protection Fund), specialising in wealth strategies and investments for business owners and
high-net-worth clients. He can be reached at Ashley.Mangles@rbc.com, or 250.334.1504.

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