The long-anticipated arrival of the second phase of the client relationship model (CRM2) has initiated a new era of disclosure for financial advisors.

By now, many of your clients have opened their account statements to see, perhaps for the first time, how much they pay for your advice. And, although many advisors have been holding those delicate conversations with clients about fees for months or even years, much work remains in communicating to clients what they have been getting in return for those fees.

While client flight always is a risk, clients are becoming increasingly aware of the investment options available to them. The onus is on you to shore up your clients’ confidence that their relationship with you is worthwhile.

“There always are going to be people who want to ‘change their oil’,” says Clay Gillespie, managing director of Rogers Group Financial Advisors Ltd. in Vancouver. “If they don’t appreciate the advice or its worth, they shouldn’t be dealing with an advisor.”

What is different now, however, is that both clients and regulators are demanding more transparency. Even robo-advisors use transparency as part of their pitch to attract the business of millennials and high net-worth clients.

For some advisors, transparency has meant going beyond the regulatory requirements and disclosing to clients more details about the cost of the advice given.

Although disclosure requirements may be seen as a threat to your client relationships, you can think of it as an opportunity to show your clients what you do for them and how they benefit by remaining your clients.

Now that you have made the required disclosure mandated by CRM2 and explained the reforms in layman’s terms, the challenge is to help clients grasp how you strengthen their financial footing.

“You want to be able to manage and exceed expectations,” says Larry Distillio, assistant vice president of practice management at Mackenzie Investments in Toronto. “Clients are in a position to make a decision: to choose to work with you; to increase or decrease their share of wallet with you.”


For advisors who began preparing their clients for CRM2 up to two years ago – when the timeline for the impending changes became known – the new regulations have been a non-event, says George Hartman, CEO of Market Logics Inc. in Toronto.

“The whole response really centres on value rather than price,” Hartman says. “To the extent that advisors can reiterate and communicate their value, the question of price goes away.”

That’s been the experience of Dian Chaaban, investment and wealth advisor with RBC Dominion Securities Inc. in Toronto, who mainly operates on a fee-based model. “I didn’t get any calls about CRM2 when [my clients] got their reports,” she says, adding that her clients had already been receiving a yearend fee summary.

Still, to reinforce the message that CRM2 was on its way, Chaaban sent several reminders to reassure her clients that the fees they will see posted are not new.

A month before the first batch of CRM2-compliant statements was sent, Chaaban emailed a newsletter to refresh her clients’ memory about the rationale behind CRM2. In that post, she discussed the statements’ contents, embedded links for further research and extended an offer to meet with her clients and their families to field questions.

“It was my attempt to explain the reports in layman’s terms,” Chaaban says.

Despite your best efforts to educate your clients, don’t assume they will remember everything you covered during your conversation about fees. That’s especially true if past conversations over fees have been steeped in industry jargon. So, at your next meeting with a client, take a few minutes to assess his or her understanding of your fee structure.

“Instead of waiting for the client to say, ‘How much is this going to cost me?’ you must be really clear about your fee schedule,” says Evan Thompson, founder and business coach at Evan Thompson and Associates in Toronto. “Explain in lay terms what services are offered, how their [fees] are calculated and anything else that appears in small print.”

And if clients familiar with CRM2 call to discuss their statements, take that as an opportunity to highlight the value of the services you provide.

“When clients call you, they want you to validate the fee,” Chaaban says, adding that an “ongoing discussion” about the many ways you look out for the client is key – such as preparing newsletters and holding seminars and other client events.

Some of the worst responses you can give to an inquiring client are to use a brochure to do the explaining, to dismiss the importance of the question or to inject a joke into the discussion.

“Stay away from humour of any form,” Thompson says. “Don’t say, ‘I have to charge these fees because I have three kids headed to university.’ When advisors make [the fees] about them, people just cringe.”

Clients should leave your meeting with an understanding that there’s a fair exchange – that the fees charged are in keeping with the amount of attention you give to the relationship, he adds.


Increasingly, advisors are expected to offer a “holistic” or comprehensive approach to wealth management. But unless you tell your clients that you do so, Distillio says, don’t assume they are aware of your entire skill set, service offering and connections to other experts.

That’s why you have to do a regular inventory of your client base, he says, and discuss events your clients may face and the possible solutions you can offer when you meet.

Whenever Gillespie meets with his clients to discuss investment issues, he goes over the list of services he offers. “I’ll give [my clients] this grid and ask them to circle the areas that concern them,” he says. “It’s just a way of showing them all the areas that we can touch upon.”

Gillespie calls that handout a “financial road map.” It highlights specific categories in which clients can seek advice, depending on their stage in life. This tool gives clients a visual representation of the full spectrum of services available to them.

With the road map in hand, Gillespie broaches other issues that clients may not have considered, such as setting up charitable trusts or confronting health challenges that could complicate the client’s retirement picture.

The fee conversation also should involve talk of how you are building on your skills and processes, Distillio says. For example, you might mention any new designations you have acquired and your continuing education activities, then explain how those efforts improve your expertise and your ability to analyse their portfolio.


If clients are “hung up” on fees, Hartman says, “it’s not a reflection of the price, but a sign that they don’t understand or appreciate the value of the service you provide.”

Hartman knows of an advisor who mails out an “invoice” to his clients, detailing all the services he provides on a monthly basis. The document is a graphic breakdown of the hours that advisor spends tending to the client’s file.

But instead of listing an amount owed, the bottom line of that invoice shows a “zero” balance. Hartman says it’s that advisor’s way of articulating his “value proposition,” to reveal to clients all the work that can go unnoticed.

Chaaban includes a “consolidated report” with her clients’ statements. That report gives clients a digest of the overall portfolio performance, accounting for geographical exposure, sectoral breakdown and projected monthly income, among other factors that can influence portfolio performance.

Each report also contains handwritten notes to show clients that Chaaban has reviewed the document.

There’s a difference between following the regulations to the letter and embracing the “spirit of the regulations,” Hartman adds. You can do the minimum required. Or you can lead a discussion about those areas in which CRM2 falls short.

For example, an itemized report of how your clients’ dollars cover a variety of services can help to show what clients are getting for their money.

Distillio points out that Mackenzie offers a tool for advisors called the “value calculator,” which produces a printable summary of the “hourly value of services” that the advisor provides. That tool can be found on the Mackenzie Investments website.

This tool shows how many hours you spend constructing the client’s portfolio, tweaking the financial plan, producing educational material or seminars, co-ordinating with estate specialists – all the upkeep that goes into managing an account.

So, for example, if a client pays $5,000 annually, the value calculator might communicate that over the course of a year, you spent 30 hours managing the relationship, which translates to an hourly rate of about $165.

“[The report generated by the online tool] really gives the client a clear picture of how we go to bat for them,” Distillio says. Using the tool also serves as an exercise that forces you to “take a hard look” at your business.

Hartman agrees: “[CRM2 is] forcing advisors to think about their value proposition, whether they’re actually delivering something and whether it’s commensurate with the costs.”

And the better you can identify areas in which you enhance a client’s financial standing, both Distillio and Hartman say, the more confident you will be in justifying your fees.

Advisors who are unwilling to “reinvent themselves,” Gillespie says, face tough times ahead. If you can’t position yourself as an all-round resource backed by a team of specialists, other advisors can attract your clients who are looking for more comprehensive advice.

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