Although it was touted as the regulatory change that would shake up the industry, CRM2 has, so far, had a limited impact. Given the disruptive nature of the regulations, the consensus from the advisory community is that client reaction has been surprisingly muted. Canadian investors are, on the whole, satisfied with how their advisors are handling regulatory initiatives, as a recent survey conducted by the Gandalf Group (commissioned by AGF)
“So far, CRM2 has been a bit of a non-event, clients have not paid much attention,” says Carrie Kimberley, Director, Practice Management at Credential Financial. “There were suggestions that clients would start moving their accounts - that advisors would lose accounts to competitors - but it didn’t really happen.”
All may seem serene on the CRM2 front right now, but Kimberley does believe this could be the “calm before the storm”. Canadian investors have only received one set of new statements so far and when similar regulations where introduced in the UK client concerns didn’t rise to the surface until 12 – 16 months after implementation.
“2017 has been a relatively good year in the markets so there hasn’t been much concern from clients with regard how their accounts are doing. As a result, most clients are not paying too much attention to the cost of the advice they are getting,” Kimberley says. “If there is to be a change in the markets and accounts are down, but clients still see fees being charged, that’s when advisors may start to face some difficult questions.”
Kimberley encourages advisors to not get complacent and to continue being proactive in starting conversations on fees. Clients naturally expect a correlation between the performance of their portfolio and how much they are paying, so limiting client surprise or anger in the event of a market downturn should be a top priority.
“We’ve tried to tell our advisors to focus on not having all of their value determined by returns, there needs to be a broader wealth management, goals-based approach,” Kimberley says. “Discussing fees - and being transparent around those numbers - should become an innate part of how an advisor runs their practice.”
As well as helping to build trust with current clients, Kimberley believes that being open and proactive on fees could create opportunities for advisors to attract new clients. Asking a prospect what they pay in advisor fees could segue neatly into a fruitful conversation if the current advisor hasn’t been as transparent.
“On the other side, if you are not proactive on fees, you risk having your clients prospected by somebody else,” Kimberley says. “Having a really good value proposition that differentiates you from the next person is very important. Being transparent on fees is important, but advisors also need to think about what differentiates them and why they are worth those fees.”
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