​Happy CRM2 Day

The new client relationship model goes live. Is everyone ready?

Advisors are prepared, or, perhaps, more accurately, resigned, to implement a pile of new paperwork today.  Whatever your take on the new regulations, it's finally here: This is CRM2 implementation day. 

After months, no, years of debate, the new client relationship model known as CRM2 becomes the law of the land. The industry has been inching toward this goal for years now. Advisors have developed new reporting and data capture schemes. Reporting schedules have been updated, new computer systems polished. Communications and reporting procedures tweaked.

In the end, it will all get done. This doesn't mean advisors are happy about it. As one advisor, a western-based planner who made it on to our Top 50 Advisors list put it, "I accept it. But I think it's crazy."

There has been no shortage of complaints about the new regulations. Advisors already feel the costs of compliance--now a billion dollar industry in Canada--are way too high, if not out of control. There is a sense advisors have to forward masses of useless information to clients, much of which will be ignored. As the advisor put it, "you don't get this stuff from your doctor or a lawyer. When you buy a car you don't have to send them all this stuff.”
No, no you don’t.  

From now on, though, whether through a commission or a fee, advisors will have to break down, pre-sale, what a client is paying for each investment. CRM2 requires all advisors to disclose all expected fees. Advisors will also have to provide a description of the benchmark used to measure the performance of that investment. As well, trade confirmations for fixed income securities will have to show annual yields and mark-ups or mark-downs.

All told, the industry is on new ground here. We’re still waiting for a list of comparative performance on hospitals, or real billing information from a lawyers’ office. But when it comes to buying a mutual fund, no tree will be spared providing clients radical amounts of paper.

There are those who argue the industry will be made stronger as a result of the changes. Clients will know exactly what they are getting for their services. Advisors will have conversations with their clients about the value in having an advisor (and there are many studies that show those with an advisor do better in terms of asset accumulation over a life-time than those without an advisor). But the new regulations are still going to be a burden for many.  "This stuff is constantly changing. It takes a lot of the staff's time. We're just dealing with it. It’s way overdone," says the advisor.

If anyone has comments, ideas or notions about what should, and what should not be in the fund fact sheets (that replace prospectuses), please, get a hold of us. How should new communication statements look? Did things go smoothly?