To the Globe and Mail on behaviour of advisors – CRM2 changes
March 23, 2015
Re: “Some advisers behaving badly with CRM2 on the horizon” (March 18, 2015)
Dan Hallett writes that he’s aware of “disturbing trends” as advisors prepare for regulatory changes associated with the Client Relationship Model, Phase 2 (CRM2). Among the impending changes are enhanced disclosure requirements for mutual fund performance and fees beginning July 15, 2016. Mr. Hallett writes that he’s been “told by a variety of sources” that many advisors are rushing to sell a “boatload” of mutual funds under a deferred sales charge (DSC) option. The facts do not support these anecdotal reports.
Comprehensive fund sales data show that there has been a steady decline of funds being sold with the DSC option. At the end of 2014, assets in such funds represented 37% of all load fund assets, down from 58% in 2007. It should be noted that this decline has occurred during the consultation, planning and execution phases of CRM2. Furthermore, while individualized reporting will be a feature of changes brought in on July 15, 2016, mutual fund expenses, fees, and dealer compensation are currently provided to investors in concise language in mandatory Fund Facts documents and in more detail in the simplified prospectus.
As to Mr. Hallett’s claim that advisors are leaving the business, the Mutual Fund Dealers Association reports their numbers trending upwards over the last five years, with an increase of 713 advisors in the last year. The Investment Industry Regulatory Organization of Canada has seen their advisor numbers holding steady.
Senior Manager, Research & Statistics
The Investment Funds Institute of Canada
Submitted: March 23, 2015