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FINANCIAL
CORNER
uestion
Q
ARE YOU READY?
Having worked as a financial advisor for
15 years, I have come to understand that
the key must-haves for all of my clients
are objectivity, service, and a unique
financial skill set to customize their portfolio. Each one of these points is equally
important, however, right now transparency is perhaps the most crucial.
It’s crucial because of CRM2, which is
coming into effect this January. CRM2,
or Client Relationship Model II, is a
new industry-wide disclosure mandate
designed to provide investors with greater
transparency in cost and performance.
This is good news for everyone, including
our industry in general, as this increase in
information will provide a level of detail
on the performance and fees that many
investors may have not ever seen.
FROM JASON
IN WOODBRIDGE
WHAT SHOULD
BE INCLUDED IN
MY RELATIONSHIP
WITH MY FINANCIAL ADVISOR?
MEANING, WHAT
SHOULD I EXPECT
TO RECEIVE IN
RETURN FOR
THEIR FEES?
r
e
w
s
n
A
BY ROCCO
DIPASQUALE
The key deliverable a financial
advisor provides is a comprehensive financial plan, which establishes needs for tax, estate,
inheritance and charitable gift
So what exactly does CRM2
mean for you, the investor?
For starters, it will be mandatory that all
investment dealers regulated by the Investment Industry Regulatory Organization of Canada (IIROC), firms regulated
by the Mutual Fund Dealers Association
(MFDA), such as respective mutual fund
distributors of each of the major banks,
and also investment counselling firms
regulated by the provincial securities
commission in Canada, send out two
new documents for every account you
have investments in. You can expect
these two documents to be delivered
to you by early 2017.
The first document is called an Annual
Charges and Compensation Report.
This document will detail all the costs
that have been paid out in the past year
for investment management, account
administration, transaction charges,
commission-paid trailing commissions,
etc. It is important to know that there are
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planning. Over and above this,
an advisor should provide an Investment Policy Statement that
customizes solutions for man-
no changes to the costs you are paying
as a result of these new reports. These
reports are meant to provide a detailed
breakdown of what you have paid to
your advisory firm in the previous year.
The trailing commissions are disclosure
for clients who have investments in
mutual funds. Mutual funds have built-in
costs calculated as the Management
Expense Ratio (MER). This is a percentage that is paid on an annual basis to
cover the costs associated with operating
the fund. A trailing commission can be
included as a component of the mutual
fund MER fee for some mutual funds.
In these instances, fund companies pay
ongoing fees called trailing commissions
to the firm for which your advisor works.
The second document is called an Annual Investment Performance Report.
This report will detail how much money
was in the account at the start of the
reporting period, how much was contributed, withdrawn and what the rate
of return was on that portfolio. This rate
of return is meant to show you how your
investment account performed by using
what’s known as a “money-weighted”
calculation, which is sometimes referred
to as your “personal rate of return.”
The importance of these two new statements should not be underestimated.
Knowledge is power and when it comes
to your money, you simply cannot risk
being ill-informed.
I highly recommend that you use these
two new documents to their full measure.
Read them closely; they’ll give you
insights that will help you decide if your
financial advisor is giving you true value
for the fees you pay.
aging risk to achieve targeted
rate of returns over long periods
of time.
To create and maintain the
above requires ongoing research
on specific holdings, markets
and the economy—all of which
needs to be explained and communicated to you on an ongoing
basis. You should also expect
regularly scheduled meetings to
review your portfolio, as well as
review any changes to your life
that affect overall financial wellbeing. Lastly, an advisor should
be willing and able to collaborate with your existing professional advisors, such as lawyers
and accountants, to integrate
your wealth plans.
This article is supplied by Rocco DiPasquale,
an Investment and Wealth Advisor with RBC
Dominion Securities Inc. (Member–Canadian
Investor Protection Fund). This article is for
information purposes only. Please consult
with a professional advisor before taking any
action based on information in this article.
ROCCO CAN BE REACHED
AT 905 738 8877 OR
[email protected]
LIFE&STYLE //