Clients will soon have a better idea of the fees they pay for investment and segregated funds. It’s all thanks to the third phase of the industry’s client relationship model reforms (CRM3), also known as total cost reporting (TCR).
With this next phase of regulatory reform, financial advisors have an opportunity to educate clients and set expectations about the enhanced fee disclosures they’ll see as part of their annual statements come 2027. Those who fail to do so risk having uncomfortable conversations with clients — and even losing them.
Here’s what advisors need to know.
What will clients see?
On Jan. 1, 2026, dealers will begin collecting data on all the embedded costs of funds in client portfolios. They must then disclose the fees to clients — in both dollar and percentage terms — in enhanced annual cost reports beginning in 2027.
The reports will feature the total amount of fund expenses (i.e., daily fund expenses) and direct fund charges (i.e., any amount charged to a client other than a management expense ratio), said Alexandra Williams, senior vice-president, strategy, innovation and stakeholder protection with the Canadian Investment Regulatory Organization.
Reports will also explain how fees are calculated and reported and why clients are being charged, she noted.
The additional data builds on CRM2, which sought to increase transparency of the cost and performance of financial advice.
“CRM3 requirements seek to clarify investment fund costs — which are mostly embedded in the value of the fund, in addition to the dealers’ and advisors’ own fees — via disclosures that are meaningful, easy to understand and enable clients to compare costs across products,” Williams said in a statement.
“These changes seek to further investor protection by mandating enhanced transparency of investment fund costs and align with the insurance and securities regulators.”
Be proactive
There will be both a practical and emotional aspect to clients’ reactions to the enhanced fee disclosures, “and we want to make sure that we’re leaning into the conversation early,” said Chandra Smith, vice-president, portfolio construction and practice management with RBC Wealth Management.
She said advisors and their dealers need to communicate the upcoming changes to clients and why they’re happening — “and, most importantly, what it means to them in terms of an investment and an advice experience.”
Kaitlyn Lawson, head of practice management with CI Global Asset Management, agreed, noting that advisors should take the time to educate themselves on the regulatory requirements of both their dealers and themselves, so they can confidently navigate the transition to CRM3. As well, she said advisors should tell clients that these changes are happening industry-wide, and that they want them to be prepared in advance.
“If advisors prepare early and frame disclosures as part of a broader value conversation, I think clients will see this as positive and be grateful for that proactivity,” she said.
“But if advisors are not prepared, if they simply think their dealers will handle it and that really no responsibility lies with them specifically, then we could see some client backlash or fee pressure increase competition for those clients, and inevitably, some attrition.”
As part of these broader value conversations, advisors must regularly show clients that they’re making solid recommendations on not just where to invest money, but in other key financial planning areas such as estate planning, taxes, insurance, cash flow, debt management and retirement planning, said Annamaria Testani, head of strategy, client and advisor experience with IG Wealth Management.
“Value is no longer reserved for the return of your portfolio,” she said.
“There is a service element that is being required that is a game changer if you want to keep your client.”
Advisors who fail to demonstrate their value will be challenged by their clients, Testani said, “but if you’ve been extremely clear [about the depth] of service you provide for your practice that you then deliver to clients, I actually see this as an opportunity for those advisors.”
Arnie Hochman, senior vice-president and general counsel at the Securities and Investment Management Association, agrees that CRM3 is an opportunity for advisors to solidify client relationships.
“The provision of additional data may serve to foster closer relationships between advisors and clients. It may give clients greater confidence as a result of having more — not that discussions before weren’t forthright — but more focused discussions on cost,” he said.
At the same time, Hochman said most advisors have presumably discussed the costs associated with financial products before and that “this isn’t new data.”
“This information does appear in offering documents, continuous disclosure documents,” he explained.
“It’s really just being presented in a different place, the annual account statement. So, hopefully it’ll be very positive for clients.”
Still, while many advisors may feel they’ve always been having open conversations with clients about fees, Smith said advisors need to clearly communicate with clients that they’ll now see fund fees in both dollar and percentage terms, as they did with advice fees with CRM2.
“If they’re seeing $10,000 versus 1%, that’s psychologically impactful,” she said.
Williams, meanwhile, pointed out that disclosures have inherent limitations, and that excessive disclosure can sometimes create its own challenges.
“Advisors have an important role to play in ensuring that such disclosures are meaningful,” she said.
“This means encouraging clients to ask questions and helping clients interpret the information, including in the context of other information such as the client’s investment performance and overall goals.”
Client expectations
There are some fears that CRM3 will change advisors’ relationships with clients, Testani said, but most clients are “getting more and more savvy” and are able to work out in their heads how much they’re being roughly charged for products in dollar terms already, based on the percentages currently shown in their annual statements.
Instead of fixating on these details, she recommended advisors focus on delivering holistic financial planning to meet evolving client needs.
“People are asking us, ‘Well, what are the other services you do, like do you do a will review? Do you do estate planning? Do you look at tax strategies to help pass assets from one generation to another in the most tax efficient way?” Testani said.
She added that advisors must invest in their business model, along with their partners, vendors and digital client experience, to meet growing expectations.
“Status quo is not an option. You have to be constantly evolving, because client expectations are being influenced, not just within the financial industry, but across all sectors,” Testani said.
In a similar vein, Lawson said multiple studies have found that the total perceived value of financial advice is made up of both emotional outcomes and functional aspects of the advisor-client relationship, such as portfolio management, financial planning and other services. Advisors should lean into the value they’ve delivered, not just in investment returns, “but also return on life.”
“Sometimes clients aren’t seeing all that behind-the-scenes work, [so] let’s show you where we’re going together and continue to give that look back in the rear-view mirror and also focusing out the front windshield on where we’re going,” she said.
“For advisors who can tell that story of impact to the client over time, we see clients becoming a lot more comfortable with that cost and exchange of value.”
Investors, on the other hand, should be reminded that they’ll receive the annual fee disclosures from their dealer at the beginning of every year, Williams said, urging them to “open them, take the time to review, and ask their advisor (or in the case of a [do-it-yourself] investor, their dealer) if they don’t understand something.”