Review process

The Canadian Securities Administrators (CSA) recently released research showing the impact of CRM2 on investment fund fees. Given that it is report card season for both school kids and investments, here is a CRM2 report card that grades regulators, firms and advisors on CRM2.

Full disclosure: As a regulator, I championed the CRM2 proposals.

CSA research

One of the objectives of CRM2 was to provide improved transparency around the costs of investing. The CSA’s research examined the years immediately before and after the CRM2 reforms took effect in 2016. It found that management expense ratios (MERs) and management fees dropped meaningfully for mutual funds and ETFs.

The regulators reported that the average asset-weighted MER for the mutual funds studied declined by 38 basis points between 2013 and 2020, representing a decline of $7.6 billion based on today’s assets under management. The declines in ETF fees were smaller, in part because most ETFs started from a lower baseline fee level. Nevertheless, the asset-weighted average MER for the ETFs studied declined by 21% from 2013 levels.

The research showed that some of the fee declines occurred because fund manufacturers lowered MERs, but more of the declines can be attributed to investors shifting to lower-cost funds.

The regulators noted that the changes cannot all be directly attributed to CRM2, but this outcome can’t be a coincidence.

Report card grades


As a former regulator, I know that regulators’ work is hard — and often thankless. You need only review the number and tenor of some of the comment letters the regulators receive on most every proposal they publish to understand their challenges.

For CRM2, the regulators get a good grade for a few reasons. It took courage to propose and implement CRM2, which was a set of reforms that was generally unpopular with industry. The regulators persisted, mostly because they foresaw the very pragmatic benefits to investors.

I also give them full marks for conducting research to study the impact of CRM2. They are often criticized for making decisions or proposals without evidence, and it’s good to see them seeking data to test the efficacy of this initiative, and hopefully to inform future initiatives.

Advisory firms: 

I commend the industry for tackling CRM2 mostly with gusto. Once it was clear the proposal was going to be implemented, industry groups formed and tackled the difficult implementation issues. Here’s where the regulators don’t shine: historically, they haven’t come to the table during implementation, when the effectiveness of a project is really determined. Industry is forced to read the tea leaves of the rules to inform big and expensive decisions about data, systems and technology. Those industry groups really stepped into the breach and made pragmatic decisions they believed would do the best job of meeting the regulatory objectives.

However, some firms did a better job of solving the data and systems issues than they did communicating the information to clients. CRM2 is a principles-based set of rules, and as a result, firms were permitted to take an approach that suited them and their clients in the terminology and presentation of the reports. Unfortunately, some just mimicked the uninspiring regulatory examples and ticked the regulatory box. Thankfully, many others did everything from conducting client research to employing communication and design experts to really integrating the CRM2 reports into the rest of the firm’s communications and reporting.

Firms were required to conduct advisor training. However, the training was mostly focused on the ins and outs of the new reports, and not enough on equipping advisors for meaningful client communications and conversations.


At the risk of establishing a predictable pattern, I also applaud the vast majority of advisors for upping their game around the transparency of fees and performance. While it was bumpy for a few at the start, I believe most advisors are now well-positioned to have more comfortable, confident conversations with clients around fees and performance.

There are, however, a few cautions worth calling out:

  • Too many advisors still use terminology that is unfamiliar and baffling to investors. I acknowledge that some of this is thanks to the terminology their firms chose to use in the reports.
  • Some advisors tiptoe through the fee conversations, making understanding difficult for clients.
  • A few advisors feel that, to be compliant, they need to explain the workings of investment fees to clients. This does not serve clients well; we should not try to teach them all the details.

Areas for improvement

Overall, CRM2 has been a game-changer for Canadian investors, and other regulators in Canada and around the world are pursuing similar initiatives to promote fee and performance transparency. However, especially with the total cost reporting (TCR) initiative in flight, I would like to offer a suggestion for each group to continue to work on.

Regulators: Please consolidate or take away some disclosure requirements, including some of the detail in periodic account reporting to clients. Too much information continues to overwhelm clients and limit meaningful transparency and understanding.

Firms: The principles-based approach to CRM2 and many other disclosure rules permits firms to significantly rethink their communications and reporting. Especially with TCR looming, I suggest you consider an end-to-end review of your entire client reporting package:

  • Ask clients what’s important to them, and start with that information.
  • Look for opportunities to present the information on a consolidated or overview basis to help clients understand their big pictures.
  • Finally, look for every way possible to simplify the terminology, to shorten the reporting, and to help clients understand — as well as to present and reinforce your value proposition.

Advisors: Continue to shift your client conversations to be … about the client. CRM2 required a focus on cost and performance, and of course both are important and should be reviewed with clients. But most clients don’t want a detailed primer on products. They just want to understand if they’re on track to meet their goals, or whether portfolio adjustments need to be made. So, focus more of your client time on understanding the client, their needs and goals.

Remember: it’s really about the client.