Change is Coming…Will You Be Ready? (November 3, 2014)
Guest column for The Globe and Mail
Securities regulators and the industry have increasingly recognized the need to provide Canadians with clearer, more consistent information about their investments. As a result, new “CRM2” rules are being phased in that will help Canadians better understand their investments and get the most out of their relationships with their advisor.
After July 2016, when the new rules are fully in place, investors will receive a statement that shows how well their investments have performed since they started to invest and their percentage rate of return over several time periods. Many companies provide this information already but under CRM2, all companies will do so.
In addition, investors will receive an annual statement showing the dollar amount that they pay for their investment products, including the costs of administration, technology, compliance, and investment advice. These costs are not new; investors have been paying all along for the ongoing services they receive from their dealer and financial advisor. But in most cases, this is the first time these costs will be listed separately on investors’ statements.
When investors receive these statements, they should discuss them with their financial advisors. But even now, it’s not too soon to be asking advisors about the fees that they charge, and the services that they provide.
An advisor’s greatest value is in working in partnership with clients, creating a plan, helping them understand how the products they purchase fit into their plan, and ensuring that clients make informed rather than emotional decisions. The more individual investors understand their personal financial goals, risk appetite and investment options, the better equipped they will be to make decisions that are right for their individual circumstances. The more prepared investors are to talk with their advisors about these issues, the more helpful the advisors can be in helping their clients stay on track to meet their financial goals.
Recent research shows that 98% of mutual fund customers trust their advisors to give them sound advice and 92% believe that they obtain better returns than they would if investing on their own.
This confidence is well-placed. Households receiving financial advice for at least four years accumulate, on average, more than 1.5 times more assets than those who do not have an advisor, after all costs have been taken into account. After 15 years or more, households with advisors accumulate more than 2.7 times more assets, compared to those that do not have an advisor.
Investors should meet with their advisors at least once a year and following any major “life event”, such as marriage, having children, job loss, or receipt of an inheritance to review their investments.
For more information, visit IFIC’s online Investor Centre at https://www.ific.ca/en/pg/investor-centre/ and follow us on Twitter. We will post at least one investor-friendly tweet a day during Financial Literacy Month in November.
Joanne De Laurentiis is the President and CEO of The Investment Funds Institute of Canada.