How You Can Better Understand The Costs And Performance Of Your Portfolio (November 20, 2014)
Guest column for the Toronto Star Financial Literacy Supplement
by Joanne De Laurentiis, President and CEO, The Investment Funds Institute of Canada
The new approach stems from changes in securities rules following lengthy consultations with investors, educators and the investment industry. The new rules, known as Client Relationship Model – 2 (CRM2), applies to many financial products: mutual funds, ETFs, equities, and debt products.
For investors, the new rules mean they will see more use of plain language and a clearer, timelier presentation of information. Investor fees will be listed in dollar amounts rather than percentages.
Simplifying your statements
The first round of changes is already in effect. Investors are now advised of the costs of an investment purchase in advance of the trade. In addition, investors receive a general description of benchmarks.
But this is just the beginning. Starting in July 2015, investors will see changes to their statements, with book cost or original cost being listed for each security. By the end of 2016, consumer-friendly reporting of performance and costs, in dollar terms, will be provided to each investor.
For many Canadian households, these changes will be most visible through their mutual fund statements. Members of the investment funds industry, as represented by The Investment Funds Institute of Canada (IFIC), are encouraging everyone within the sector to adopt consistent approaches that will help consumers easily understand the costs and performance of their investments.
CRM2 and the recently introduced Fund Facts document will enhance the advisor-investor relationship as they provide investors with easy-to-understand information about their investment funds, account fees and performance.
The industry is confident that investors will use this new information to engage more actively with their advisors, whose roles include guiding investors to articulate their savings objectives, creating a plan, and then helping the investor to stick with it. It is well established that advisors make a difference. Informed investors are more committed to saving, resulting in a much improved financial future for themselves and their families.
The investment funds industry is proud of its legacy of helping individual Canadians to plan and save for the future. It is important to us that these initiatives be implemented effectively to empower investors through better information and education.
Similarly, Canadian investors should be excited about what this new era in investor information will mean and should use the information they will receive to make the most of their advisors as financial coaches.