Firm leaders emphasize value over cost, highlight flows into active strategies and explain how advisors can communicate these dynamics to clients
On paper, the total cost reporting (TCR) requirements in the CRM3 regulations should further incentivize a focus on cost management. The full itemized disclosure of embedded investment costs that has been required since the start of 2026 ought to preference the lowest cost investment products, but that shift in the incentive structure runs up against a Canadian trend towards active management. Despite typically higher fees than passive products, a study at the end of 2025 from TD securities found that 50 per cent of all ETF flows in Canada went to active products. While stats from this year may show how TCR eventually shapes Canadians’ demand for investment funds, one team insists that value should still take precedence over cost.
Mark Bankay, Head of ETFs at Manulife Investment Management in Toronto, and Robert Wernic, Head of Investment Specialists at Manulife Investments in Montreal, offered their view into how CRM3’s total cost reporting requirements have entered into their approach. Bankay outlined how his team has worked to better demonstrate value created through performance while disclosing cost. Wernic highlighted the role of TCR in his team’s approach to advisor education and why he believes advisors need to still lead with value.
“I think there's a misrepresentation maybe that total cost reporting or CRM3, it's about forcing advisors or investors to go to the lowest cost possible solution, when in fact it's all about optimizing the value you get for the cost you're paying,” Wernic says. “So it's all about ensuring that you're delivering either differentiation, or alpha, or value for the cost you're charging and ensuring that you don't have a bad year or that cost becomes front and center because you didn't deliver on that promise.”
How Manulife is managing costs
Just as they emphasize value in their investment products, Bankay and Wernic explain that their firm is seeking to bring costs down wherever possible. Bankay explains that Manulife’s ETF team has rolled out a suite of ‘Smart ETFs’ which use systematic investment techniques driven by a quantitative model. More of the management work is done upfront to build those models, but once they’re running the work becomes somewhat more straightforward. Regular pieces of portfolio maintenance like rebalancing can be done for less cost.
“In terms of how we trade, how we rebalance, all of that gets factored into how we construct the portfolios,” Bankay says. “The actual models themselves won't be static over time, it's just how we execute will be more efficient over time.”
The Manulife team are also looking for ways to add AI and automation into their processes to control costs. As they do so, however, Bankay stresses that they want to maintain human control and decision-making at the core of their approach. AI, he says, can be a helpful tool to keep costs in check, but it’s not something they want to use to make their decisions for them.
How asset managers, advisors can communicate value
Cost remains a factor, but not the driving force behind how Manulife constructs their investment products. Bankay says they begin their design process by asking how they can deliver value above their fee. That doesn’t always mean pure outperformance. It can be a specific outcome that suits a certain kind of investor. Bankay uses the example of a dividend fund, noting that an index of the highest dividend payers may not be the stocks an investor wants to own. Instead, they can seek out the hallmarks of dividend growth and construct a portfolio that adds that value over time.
Wernic explains that for advisors, the new onus is to communicate that value should they elect to recommend a higher fee strategy. He notes that certain dividend strategies, especially on the Canadian market, can create a huge amount of overlap with other index funds, inadvertently creating concentration risk. He highlights the value that comes from a more differentiated dividend strategy, for example, as a key communication point that advisors can use to explain why certain strategies cost what they do.
In the face of TCR disclosure requirements, Wernic believes that advisors need to find ways to ensure cost doesn’t drive every decision. He argues that if advisors start to try and compete on cost, rather than value, they play a losing game. Focusing on value requires more nuance, but leaves more room for success.
“I tell my advisors, if you're only competing on the lowest cost, there's always going to be somebody that's cheaper than you. If you're only competing on performance, there's always going to be somebody that outperforms you,” Wernic says. “So what else can you bring to the table? And it's about highlighting the characteristics that I had mentioned about the portfolio composition, the diversification that allows you to sidestep just those two facets and really highlight the value that we bring to the table.”
