RE: Inside Track: What needs to be said about what not to say, by Neil Gross, www.investmentexecutive.com, Nov. 10, 2014.
If you were wondering which "prominent mutual fund company" Neil Gross was referring to in his recent column, it's us: Invesco Canada Ltd.
If his intent was to shame us without naming us, we'd rather he had named us. Why? Because we're proud of the work we've done toward helping advisors explain their value to clients in terms that their clients will understand.
Gross hasn't seen our presentation, The Language of Fees, nor did he contact us before writing his critique. If he had, he would've known that we've been at the forefront on the second phase of the client relationship model (CRM2), drawing the connection between greater transparency and stronger client/advisor relationships.
That's why we've been advocating that financial advisors get out in front of these regulations and start discussing their compensation structure with clients now — not in 2016 when the final rules are set to come into effect.
Without giving away our whole presentation, the core message is to contact your clients and review all fees at the earliest opportunity. We believe this conversation is crucial for all advisors, whether their business is commissions-based or fee-based, or whether they're licensed by the Investment Industry Regulatory Organization of Canada or the Mutual Fund Dealers Association of Canada.
If Gross had asked us about our program, he'd know that the research was based on investor input. In fact, we presented investors with the term "trailing commission" next to an explanation of a trailing commission and asked which provided greater clarity into the fees they paid. If you guessed "trailing commission," you might want to call your Invesco Canada wholesaler to book a session.
Rob Kochel, vice president of Invesco Consulting explains our mission best: "The goal of our research is not to mislead the investor with ‘euphemisms and overt message management,' as Gross claims. It is to help advisors and investors better understand CRM2 with personal language as well as regulatory terms. That's our mission."
Far from "airbrushing away" the word "commission," our goal is to help advisors explain that trailing commissions cover the costs of the advisor's ongoing service. At no point do we recommend substituting "standard charges" for "trailing commission," although we do recommend "standard account fee" for fees that are standard for a given account, such as an RRSP administrative fee. Those of you who've attended the presentation already know that.
The objective of CRM2 is to ensure that investors receive full disclosure on their investments, both in terms of performance and the costs associated with them, including advisor compensation.
Invesco fully embraces these objectives; and, in that regard, we are in full agreement with Gross. But we believe that transparency is best achieved through plain-language explanations rather than through industry jargon.
President and chief operating officer
Invesco Canada Ltd.
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