New disclosure rules

New disclosure rules will rock the boat

May 22, 2015

Are you prepared to fully appraise the value you receive from your financial advisory or investment relationship?

If not, then get ready, as your friendly financial regulators are going to make you do this soon.  Or, more correctly, they are forcing your investment suppliers to give you the tools to more accurately make such an evaluation.

Three points I need to make at the outset:

  1. The new disclosure rules are a good thing for consumers of investment advice and products, as they will show you how much you are paying;
  2. They are a good thing for advisors who have always been clear and transparent on costs and are providing good value; and,
  3. The new rules may be scary to advisors who have been less than open about the costs of investing, or have not been providing all of the services and advice that their clients need.

Getting ready for these new rules, called by regulators CRM2 or Client Relationship Model phase 2, is costing financial institutions millions and millions of dollars. The regulators believe this is money well spent.

It will be interesting to see if the recent trend of decreasing investment management fees continues, if the trend accelerates because of increased disclosure, or if it slows down because of increasing costs. But I digress…

Let’s get back to how you can prepare yourself for the new regime. Because, according to a recent survey of 1,000 investors in Canada*, not many of you are aware of these new rules and advisors may need to do a better job of preparing you.

Better disclosure on returns is starting this year, but the real fun comes in July, 2016, when your investment statements will start to disclose all fees, expenses and other costs, actual or possible, in both percentage and dollar terms, on your statements. You will then know how much you are paying your investment dealer and how much it would cost to cash in your investments. You can ask your advisor how much of that compensation is paid to her or him.

Personally, I can’t wait, and look forward to a very good year next year and in 2017. As a financial writer Rob Carrick put it in his Globe and Mail column on May 12, 2015, “If you have a financial plan to guide your investing and regular meetings to assess your progress, your fees are buying a lot.”

For our team, that’s table stakes.

But you will have to make the assessment about your investment advisory and financial planning relationship. So start asking yourself if you are getting the level of service described above, if you are clear on where your plan is taking you, and you are satisfied that you are making consistent progress toward your goals.

If the answer is yes to all those questions, then look at your fees as a great investment, and good value for professional advice.

To quote Mr. Carrick being less charitable in the same newspaper column, “If an adviser has not done anything for you but invest some money in mutual funds, you’re being hosed.” Ouch.

While these disclosure changes and the possible ramifications are more of an alert to advisors, consumers also have a responsibility. Shockingly, the survey I mentioned showed that 31% of investors believe that they were paying no fees for their financial products and advice.

Folks, that ain’t true. Virtually nothing is free, as you know. If you’re in that 31%, or in the other half of investors who are not completely clear about your costs of investing, it’s time to ask some questions.

Be reasonable, though. It costs a lot of money to safeguard and manage your investments, and if you receive good advice, that is usually worth far more than the fees you’re paying.

It’s your responsibility to be an informed consumer. Start asking those questions.

*Survey conducted in 2015 by PMG Intelligence, Marketing Directions and 21st Avenue Partners.  Several questions were asked of 1,000 Canadian investors with more than $10,000 of investable assets. Quoted in Globe and Mail, May 12, 2015. All rights reserved.

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Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.

Please consult legal, tax, insurance and investment experts for advice on your unique situation.


David Christianson, BA, CFP, R.F.P., TEP, CIMis a financial planner and advisor with Christianson Wealth Advisors, a Vice President with National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.