Partners discussing new plans

Since its inception, the Investment Funds Institute of Canada (IFIC) has advocated for more engaged, educated and informed investors. When investors are financially literate, they make investment decisions that are in their best interest and aligned with their long-term financial goals.

One key aspect of being a well-informed investor is understanding the fees involved in investing, and of course that’s where the client relationship model reforms (CRM2) come into play. Those rules, which were fully implemented in 2017, were the second stage of reform by the Canadian Securities Administrators (CSA). The goal of CRM2 was to provide Canadian investors with greater transparency into account performance and the costs involved to realize that performance, something IFIC has supported throughout the development and implementation of the rules.

Recently, the CSA released a report examining the impacts of CRM2. We were not surprised that the report found management fees and management expense ratios (MERs) had gone down on average — a trend that started years before the implementation of CRM2.

There are several reasons fees have been dropping over time, including an increasingly competitive market, greater operational efficiencies with new technologies and process design, economies of scale, and growing investor interest in lower-cost products. Regulatory intervention could also be a factor.

But we agree with the CSA’s observation that the research establishes correlation (but not causation) between the introduction of CRM2, lower fees and higher risk-adjusted performance.

We applaud the CSA for undertaking this type of research, which is among several important principles of effective regulation. Research on post-implementation impact is important for evaluating the effectiveness of intervention and determining whether regulatory objectives were reached. It also demonstrates a commitment to transparency and accountability.

At IFIC, we work collaboratively with regulators, and we commend them for listening to the voices of both the industry and investors — who share many common goals — when making regulatory decisions. Balanced, coordinated regulation protects investors while avoiding undue burden on the industry.

The next phase of enhanced fee and performance reporting will take effect in 2026 with total cost reporting (TCR). While IFIC and the investment funds industry are keen to improve investor knowledge and confidence, we also recognize the challenge that lies ahead to ensure that investors really understand the upcoming changes to cost reporting.

Leading up to the introduction of TCR, the industry aims to further simplify how cost reporting will be implemented. IFIC has an active TCR-implementation task force and sub-groups that will assess how the industry can best meet the challenges of operationalizing the complex TCR system changes and then communicating those changes clearly to investors and their advisors. We also continue to work with regulators to help facilitate the implementation and to achieve a positive outcome for all the industry’s stakeholders.

Andy Mitchell is president and CEO of the Investment Funds Institute of Canada.