6/13/2014 11:21 AM

1

CRM2 info session for Sales

Objectives

By the end of the session, you will be:

• familiar with CRM2 and the requirements being

implemented over the next 3 years

• aware of the impact of CRM2 and better positioned to

support financial advisors

6/13/2014 11:21 AM

2

Agenda

2 What is the impact of CRM2?

1 What is CRM2 and when does it happen?

Topic 1:

What is CRM 2 and

when does it happen?

6/13/2014 11:21 AM

3

CRM2 - what is it?

• industry-wide regulatory amendment initiated by CSA*

• mandated under National Instrument 31-103

• applies to all registered dealers, advisers and fund

managers in Canada

* CSA = Canadian Securities Administrators

CRM2 - what is it?

• CRM2 brings increased transparency for clients

regarding fees they pay and performance of accounts

• clients will be better able to:

– assess relationship with their advisor and his/her dealer

– see how they’re progressing towards investment goals

• more clients will be placed in suitable investments due

to increased account opening disclosure requirements

6/13/2014 11:21 AM

4

CRM2 - what is it?

Key CRM2 requirements include:

• annual account performance

• account fees and charges

• pre-trade disclosure of fees

• trade confirmation and client statement requirements

CRM2 - when does it happen?

• June 2012 - CSA released CRM1 (proposed

amendments)

• March 2013 - CSA released CRM2 (final amendments)

• July 2013 - CRM2 amendments came into effect

6/13/2014 11:21 AM

5

CRM2 - when does it happen?

July 2014

Pre-trade disclosure of all charges:

• clients must be informed of any related fees

• including if firm will receive trailers for security held

Information about benchmarks:

• clients must be provided with a general explanation of

performance benchmarks

6/13/2014 11:21 AM

6

July 2015

Clients to receive enhanced account statements:

• name of applicable investor protection fund

• market value of holdings

• disclosure of any securities subject to DSC / LL fees

• description of how each security is held

– nominee / client / intermediary

• ACB or book value of securities

July 2016

Enhanced fee disclosure on trade confirmations and

statements:

• new annual statement and updated confirmations

showing fees and charges (with account trailer fees)

• registered dealer must provide dollar weighted

individual ROR to the client

• manufacturers to provide new reporting info to dealers

– account level trailers to be reported via FundSERV

6/13/2014 11:21 AM

7

Topic 2:

What is the impact of CRM2?

Impact of CRM2 on Dealers

Investment Executive surveyed 107 compliance officers

and company executives:

– 65.5% expect impact will be high or fairly high

– 22.7% expect it to have "somewhat" of an impact

– 10.2% expect a modest effect

– 2.3% believe the industry won’t change at all

6/13/2014 11:21 AM

8

Impact of CRM2 on Dealers

• dealer head offices are preparing for CRM2

• dealers have to report account-level fees and dollar-

weighted personal ROR for 1,3,5,10, since inception

• most information dealers need to report to clients (with

exception of account level trailers) is already being

reported to them by FTI

• there may be a shift towards purchasing “fee for

service” products in order to reduce client fees, only

charging for services they need

Impact of CRM2 on Clients

• our implementation of Fixed Rate Administration made

MERs for our funds more visible to clients

• statements produced by registered dealers and fund

manufacturers will change as a result of CRM2

• ideally, most clients are aware of fees they pay, and

regularly monitor their accounts (measuring returns

against benchmarks)

• in the real world, is this really the case?

6/13/2014 11:21 AM

9

Impact of CRM2 on Clients

Environics conducted a survey in October 2013:

– 1,004 Canadians over 25 years old and with more

than 25,000 in investible assets

– 44% said they don't know or aren’t sure how much

they pay in annual fees for advice they receive

– 25% believed they paid nothing

How will we support our partners?

Client Services

• as of January 201, IAs may ask for info about their trailer

and advisory fees which will be available in SMS

• starting 2016, clients and IAs will call about personal rates

of return on client-name account statements

• also starting 2016, clients and IAs will call about changed /

enhanced statements

Dealer Services

• explain changes from CRM2 to dealer head offices

• addressing questions and concerns about advisory fees

and how these be reported to their offices

6/13/2014 11:21 AM

10

How will we support our partners?

Sales - what can we do to support IAs?

•

•

•

•

•

Questions

and

Answers

6/13/2014 11:21 AM

11

Summary

As a result of this session, you should now be:

• familiar with CRM2 and the requirements being implemented

over the next 3 years

• aware of the impact of CRM2 and better positioned to

support financial advisors

Action

21

• speak with your SAC to see how CRM2 will create

business opportunities / risks for advisors in your territory

• check out the Investor Executive website for a 3-part

series of short articles on CRM2: http://www.investmentexecutive.com/-/navigating-crm-2

6/13/2014 11:21 AM

12

Dealer Use Only / Not for Distribution to the Public

THANKS FOR YOUR ATTENTION!