InFocus: CRM2 Insight

Time for advisors to up their game post CRM2

Time for advisors to up their game post CRM2

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Despite the varying predictions, nobody can be completely sure about how big an impact the implementation of CRM 2 will have for Canadian advisors. CRM2 is going to have consequences for the whole industry, and both direct-to-investor firms and firms who use financial advisors are going to have add more to their client offerings. “I think it’s going to have more of an impact than most people do,” says Tony DeThomasis, President of DeThomas Financial Corp. “People are going to have to prove their worth. CRM2 will be a wakeup call to everyone in the financial industry, not just advisors.”

Firms who sell direct to the public are often eager to highlight how their management expense ratio (MER) costs are lower than those of a fund with a trailer fee. But with new transparency rules, investors will become aware that MER costs are the same for both types of fund, so will they remain satisfied with buying from the direct seller who provides no financial advice?

“The advisor channel always get hammered on costs but now the reverse is going to happen when the wholesale price of the direct fund is known,” says DeThomasis. “Consumers are going to ask what they’re getting for their fees. They know what they’re getting from the advisor channel.  But when they buy from a direct firm, no one calls them. They’re going to ask why they’re paying more for a similar product with much lower fees.”

Ultimately, all financial firms are going to have to examine their cost structures. While advisory fees are the focus at the moment, this is just the start of an ongoing discussion on all costs. Advisors have no alternative but to adapt and come up with new strategies to add value to their client relationships.

DeThomasis believes that advisors should accept the changes head on and be proactive in updating their practices. “Advisors should see this moment as an opportunity to improve their credentials and improve their overall product and service offering,” DeThomasis says. “They also need to make sure that the firm they’re with does not reduce their payouts.”
 

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DeThomas started in 1987 with a single office and four advisors. Today De Thomas manages over $1 Billion of assets with advisors and offices located across Canada. Even though we have grown in size, we continue to manage our business as if it were still a single family office. Each employee and advisor is valued and treated as family, where everyone has the opportunity to contribute and share their ideas.