As the second phase of the client relationship model (CRM2) took shape during the past several years, many in the financial services sector may have presumed that the new regulatory system would be principles-based, according to Rebecca Cowdery, a partner with Borden Ladner Gervais LLP in Toronto.

But that’s not how the new system has actually turned out, she told attendants at the Canadian Institute of Financial Planners’ (CIFPs) annual conference in Vancouver on Thursday. Instead, the new system is very much rules-based.

“The rules are so detailed, you are not permitted to meet the principle in the way that you think will serve your clients best,” Cowdery said. “You have to follow these incredibly detailed requirements.”

Although CRM2 is in its second year of implementation, it still sparks confusion among financial advisors and other participants in the sector, she said. For example, some firms are still trying to decipher the highly technical rules surrounding the upcoming requirement to show the position cost of securities in clients’ quarterly account statements, which comes into effect in December.

Another issue that may cause some consternation among financial professionals is that the new rules do not require disclosing the full cost of investing in a mutual fund — although a goal of CRM2 is to increase transparency of fees charged to clients. This is because CRM2 compensation statements will not specifically disclose the advisor’s fee.

“All [the statements] will show is what the dealer firm received,” Cowdery said, noting that this may be confusing to clients.

The annual compensation and performance reports are to be delivered by July 15, 2017, said Cowdery, although many dealers will be sending these at the end of 2016.

Another area of uncertainty is the reach of CRM2, which specifically covers securities and excludes products such as segregated funds, high-interest savings accounts and guaranteed investment certificates. One issue for advisors is how clients will react to the differences in fee reporting.