Bridgehouse introduces Morningstar Managed Investments Program

The Investment Funds Institute of Canada (IFIC) is calling on regulators to consider expanding disclosure to investors about the costs of investing to include the management expense ratios (MERs) of investment funds.

Specifically, IFIC announced on Tuesday that it is seeking a meeting with the Canadian Securities Administrators (CSA), the Mutual Fund Dealers Association of Canada (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC) to discuss possibly expanding the disclosure that’s now provided to investors under the second phase of the client relationship model (CRM2) reforms to also cover investment funds’ MERs.

The issue first arose during the implementation of the CRM2 requirements, when the MFDA was grappling with the details of adopting CRM2 reporting. In late 2015, the MFDA launched a consultation on possibly requiring disclosure of the costs of owning investment funds in addition to fees paid to dealers — expanding the disclosure to also include fund management fees, operating costs, redemption fees and short term trading fees.

Read: MFDA mulls expanded CRM2 disclosure

At the time, IFIC says it supported the idea of expanding disclosure to include MERs. Now, its members “are ready to discuss a plan for extending disclosure requirements to encompass the full management expense ratio (MER) of investment funds,” IFIC says in a statement.

The MFDA consultation came in response to feedback that the regulator was receiving at the time from dealers, reps, and others.

There were several factors underlying that effort, including a desire from some firms to provide clients with more comprehensive disclosure; levelling the playing field between independent dealers and integrated firms that have fund manufacturing and distribution under one roof; and to make CRM2 disclosure more consistent with the reporting provided in the Fund Facts up-front client disclosure.

Although the final CRM2 requirements have only just been implemented, IFIC says that the industry is prepared to begin work on expanding them — an initiative it’s referring to as CRM3.

“One of the early successes of CRM2 is that client/advisor discussions are generating more questions about the full MER. Our members now are ready and willing to turn their attention to CRM3,” says Paul Bourque, IFIC’s president and CEO, in a statement. “CRM3 will take some time to design and implement and regulators can absorb and incorporate learnings from CRM2 as we work through new CRM3 rules together.”

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