Special Feature

Advisors’ Report Card 2015

Although advisors are continuing to see significant growth in their books of business, their practices are undergoing a seismic transformation as a result of CRM2. All the insight, the ratings and the candid comments from the September 2015 issue of Investment Executive.

Advisors hope the new CRM2 reporting requirements will end their pervasive - and persistent - dissatisfaction with client account statements

By Jade Hemeon | September 2015

Although financial advisors remain dissatisfied with the quality of their firm's client account statements, most advisors are hopeful that the detailed reporting required under the second phase of the client relationship model (a.k.a. CRM2) will result in statements that are less confusing and provide greater clarity for clients.

Averaging all the ratings advisors gave to the "client account statements" category for this year's Report Card series resulted in an overall average performance rating of 7.8 and an overall average importance rating of 8.7. The difference between these two ratings, known as the "satisfaction gap" was the third-largest among all the categories in the Report Card series, continuing a trend that has persisted year after year in Investment Executive's annual surveys.

The complaints from advisors were nothing new, as advisors said client account statements are usually disorganized, too dense and lack historical perspective.

"All the information is there, so nothing is missing," says an advisor in Ontario with Toronto-based Bank of Nova Scotia. "But there's too much information given, so it's confusing and dense for clients. Advisors end up having to spend time deciphering the statements for clients."

In other cases, advisors complained about the scarcity of information in statements or the wrong kind of information being presented.

"I don't think [clients' statements] provide a lot of information," says an advisor in Alberta with Calgary-based Portfolio Strategies Corp. "They compare the market values in back-to-back quarters, but don't give the history or any other information."

Similarly, an advisor in Ontario with Toronto-based Raymond James Ltd. said that by showing portfolio values only for the previous month as a comparison, "clients are conditioned to think in the short term."

The CRM2 rules will require firms to provide clients with more information on their personal rates of return, as well as the fees that firms and advisors are earning, on their statements - and advisors hope this will bring the improvements they are seeking.

Says an advisor in Ontario with Montreal-based National Bank Financial Ltd.: "I have lost clients because the statements are so confusing here. I believe CRM2 is going to improve these statements, though."

Under the CRM2 rules, clients must receive a separate annual report with details on how their investments have performed in both dollar and percentage terms. Firms will have one year after July 15, 2016, to begin sending these reports to their clients. From 2017 onward, clients must receive these individually tailored reports every year, showing percentage returns for not only the previous year, but for the previous three, five and 10 years.

Firms also must provide an annual report on all charges and compensation, showing in dollars what the firm was paid for each of the products and services provided - as well as an aggregate amount.

Some firms are getting ahead of the CRM2 train by providing some of this information now, and advisors with these firms are happy with the improvements.

"[Our client account statements] give the breakdown on the rates of return and fees," says an advisor in Ontario with St. Catharines, Ont.-based Meridian Credit Union. "We're ahead of schedule. The statements are user-friendly and easy to read."

"[Our clients' statements] are easy to read, our clients love the online access, and the statements provide the adjusted cost for our clients, which is great," says an advisor in Ontario with RBC Dominion Securities Inc. of Toronto.

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