Canada’s financial services industry is in the final stretch of preparations for the third phase of the client relationship model (CRM3), also known as total cost reporting (TCR).
Starting Jan. 1, 2026, firms will begin collecting data on all embedded investment costs for investment funds and segregated funds. Dealers will be required to include those costs in their annual client statement reports, beginning in 2027.
The reporting will feature disclosure of the embedded costs of owning funds, including management expense ratios (MERs), trading expense ratios (TERs) and fund expense ratios, which are the sum of MERs and TERs, in both dollar and percentage terms.
TCR is intended to provide investors with greater fee transparency. As investors gain awareness of what they’re paying, advisors and firms risk losing clients — unless they can demonstrate their value proposition.
“At the end of the day, cost is only an issue when you don’t have a defined value set,” said Annamaria Testani, head of strategy, client and advisor experience with IG Wealth Management.
Are firms ready for CRM3?
The Securities and Investment Management Association (SIMA) conducted research on firms’ preparedness for the next phase of the CRM reforms, said Arnie Hochman, senior vice-president and general counsel at SIMA. The association represents about 150 investment fund managers, dealers and professional and business services that support the investment funds industry.
While that research is not being made public, Hochman said it found that “the industry has been doing a lot of work for a long time to get ready,” noting that fund managers, custodians, data hubs, fintechs, dealers and advisors all have a hand in getting the enhanced fee disclosures to clients.
“The industry as a whole is well prepared,” Hochman said. “Different firms are, of course, in somewhat different stages, but the overall view is firms will be ready to fulfill their obligations.”
SIMA established committees to assist its members with the transition, including one that’s developed communication materials to educate firms on the changes, he said.
Firms have been doing their own prep work too.
CI Global Asset Management’s (GAM) practice management team has been preparing for CRM3 since the spring. It created a continuing-education-accredited presentation and training materials for advisors at CI Assante Wealth Management and Aligned Capital Partners Inc., which fall under the CI Financial Corp. umbrella, as well as other advisors CI works with, said Kaitlyn Lawson, head of practice management with CI GAM.
The goal, she said, has been to proactively provide advisors with strategies for handling different client reactions to TCR and prepare them for multifaceted client conversations that include qualitative pieces like an advisor’s investment philosophy and “value matrix.”
Lawson said advisors’ readiness for TCR will ultimately boil down to the training they receive. She expects some discrepancies, depending on how effective the training is delivered.
“Those who have instituted some form of fee transparency as an expectation as part of those new client relationships may find that they feel more comfortable than those who have not, or those who have clients who simply prefer to delegate some of those conversations away and fully trust their advisor,” she added.
Banks have also been working cross-department to gear up for CRM3.
RBC’s asset and wealth management arms have been preparing for about a year and a half, said Chandra Smith, vice-president, portfolio construction and practice management with RBC Wealth Management.
RBC GAM has been preparing to generate and transmit required fund data to Fundserv, while RBC Wealth Management has been working with RBC Dominion Securities Inc. advisors so they can confidently communicate them to clients.
“The thing that unifies the two groups … is the fact that we see this as a tremendous opportunity,” said Karen Smiley, managing director, advisor channel sales, central region, RBC GAM. “We think it’s good for investors. We think it’s good for advisors.”
Both Smiley’s and Smith’s teams have been going out to RBC branches to meet with advisors one on one, “beyond just, ‘Here’s a bulletin and here’s a communication and read these resources,’” Smith said.
IG Wealth Management has invested in technological tools and is planning regular training sessions in 2026 to get its sale leaders and advisors prepped on what TCR is, how to speak to clients about the enhanced fee disclosures and the tools available to them to demonstrate their value to clients, Testani said.
One of those tools is an annual value log that advisors at IG can use at year-end to keep track of all the recommendations they provided to a client, she said.
“Our intent is to make sure that every advisor is made aware of their responsibilities in illustrating their value towards their client, and that they are armed and know where all the tools are,” Testani added.
Some asset managers have relied on custodians to collect the necessary data.
That includes Evolve Funds Group Inc., which relies on CIBC Mellon for its fund administration, custody, unitholder recordkeeping and valuation. Evolve CEO and president Raj Lala said his firm has been in talks with CIBC Mellon over the past few months to discuss the data collection.
“They’ve been able to do a bit of a buildout, where they’re going to take the information in terms of what’s required for CRM3 and then work with Fundserv” to feed the data to dealers, he said. “There’s work for us and there’s work for our fund administrators also.”
The irony in TCR is that “it’s going to increase our costs to provide this information, which is about cost transparency,” Lala said, “but I guess that’s the nature of the business.”
Hochman said, “there’s little question that in many cases firms’ costs will go up because of TCR,” but SIMA members have generally supported it as an “important adjunct to CRM2.”
The TCR rules provide a “great opportunity” for firms to revisit the CRM2 reports they developed, said Susan Silma, a lawyer and former regulator. She said these documents are a “cornerstone of the advisor-client conversation.”
“Many of those reports are overly long and complex, and not well-integrated with the rest of a client statement package,” she said in an email. “Clients continue to struggle to find and understand the information they seek. As those reports have been in place for almost a decade, it’s a good time for a refreshed approach.”
‘You are going to get challenged’
Regulators are hopeful that CRM3 will increase confidence in the industry.
“We expect to see exactly what CRM3 promised to do: greater transparency of investment costs, increased client awareness and understanding of such costs and ultimately, enhanced investor protection,” said Alexandra Williams, senior vice-president, strategy, innovation and stakeholder protection with the Canadian Investment Regulatory Organization, in a statement.
In a release, Erica Hiemstra, head of insurance conduct at the Financial Services Authority of Ontario and vice-chair of the Canadian Council of Insurance Regulators, said the “enhanced statements will help consumers make more informed financial decisions and align segregated fund reporting more closely with reporting in the securities sector.”
Testani said the changes will ultimately result in better client outcomes.
“People want to know, ‘What is the service that I’m getting for the price that I’m paying through my investment portfolio?’ At the end of the day, that is what regulators want to make sure of — are you aware of the value you’re getting and how much it’s costing you?” she said. “If you don’t have a very defined value proposition, then you better work at it, because you are going to get challenged.”
Smith echoed that, saying CRM3 gives dealers and their advisors “the opportunity to restate that strength in conviction in our process and how we go about selecting investments, not just in isolation, but as part of a portfolio.”
Lala expects CRM3 to cause some investors to shift their dollars to lower-fee products and services — but not all.
“There’s still a big segment of the investor population that understands there’s value in advice as it relates to the advisor side and as it relates to product, and they’re not fee shoppers,” he said. “I’ve seen in the ETF world very often that people like a theme or an asset class, and they like the manager … and they’re OK with paying potentially a higher fee in the hopes that they’re going to get a better overall return on the product.”
Meanwhile, Hochman said behavioural economics research shows that consumers usually react more favourably than unfavourably to clear cost disclosure and that in the absence of fee transparency, clients tend to overestimate the expected fees associated with a product or service rather than underestimate them.
“So, if those principles hold true, the overall impact [of TCR] will be positive,” he added.
And while he expects some challenges early on, Hochman stressed that it’s important to look at the transition to CRM3 as a process.
“Like any new, major, complicated initiative, it may not go perfectly,” he said. “I’m reasonably expecting that things will go quite well and that whatever course corrections are required will be made; there will be ample time for that.”
Silma reminded firms that the TCR rules are “principles-based and not prescriptive,” as was the case with CRM2.
“This will allow firms considerable flexibility to respond to the rules in a manner that delivers an exceptional client experience consistent with their value proposition, while still being compliant,” she said.