'It's insulting not to give clients % and dollar figures on their statements,' he says
Veteran advisor Jason Pereira is challenging the Portfolio Management Association of Canada’s (PMAC) view that total-cost reporting should only be done by a percentage and not a dollar value.
“I am 100% a believer in transparency, and I share the concept that what the client is getting in return for what they are paying is vital,” Pereira, who is a partner and financial planner with Woodgate Financial Inc., told Wealth Professional. “I’ve even commented about how statements need to be structured in a clear way that they 100% show every last cost, no matter what it is, including trading and account fees, and spells this out clearly and simply in a way that is not confusing for things like filing your taxes.
“Where I disagree vehemently is in the opinion that this needs to be done in percentages and not dollars. It needs to be done in both. It is nothing short of borderline insulting to the consumer to make them break out a calculator to figure out how much money they paid an advisor. How is that respectful of the consumers we are dealing with? It’s nothing short of insulting.”
This week, Wealth Professional reported on PMAC’s response to the proposal that the Canadian Securities Administrators (CSA) and Canadian Council of Insurance Regulators (CCIR) developed to provide total cost reporting for investment funds and segregated funds. Victoria Paris, PMAC’s senior legal counsel, said PMAC wanted total cost reporting to be done in percentages rather than dollar figures, so clients had true comparators between products.
Pereira responded that he’s challenged PMAC on its position in forums, and the Financial Planning Association of Canada has also made a submission making the same point that he is during the CSA-CCIR consultation process that recently ended. He said it noted that statements needed to disclose all of the fees paid to the dealer and advisor to be truly transparent about the costs.
“1.5% sounds a lot better than $15,000. That’s what it comes down to. Right?” said Pereira. “I just used a million dollar call. So, you’re a client, then, ‘what’s 1.5%? That’s acceptable. But, what’s $15,000? Let me stop and think about this for a second’. Because that’s what’s going on. Right? Frankly, people should stop to think about it. That’s the reality of it.”
Pereira noted that he includes both metrics on his client statement, but PMAC’s stance reflects a larger issue in the industry.
“All financial service industries are based on trust, and everything we do to build trust actually increases the size of the pie for all the players. Why? Because people who are apathetic to financial institutions and choose, instead, to trust themselves versus no one else, the more trust that we can create, the fewer of those people exist,” he said.
“So, when we do things like this and get pedantic about transparency and do insulting little things, like saying clients won’t understand things because what we’re really saying is we can’t somehow explain it to them in a way that they’re going to understand – that’s ridiculous. Simultaneously, it’s playing games, like basically making them take a calculator out to figure out their fees versus just telling them and showing simple respect by doing the math, we’re not doing ourselves any service in the long run.
“It is a defence for those who are fearful of it in the short-term. It is a long-term losing value proposition and is a long-term blight on the industry that needs to be corrected.”