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Healthy and Wealthy

Answering your questions about regulatory change

Providing investors with greater transparency about the cost and performance of their accounts is the driving force behind new industry-wide regulations, known as the Client Relationship Model 2 (CRM2). Top of mind for investors is how CRM2 will affect them as the regulatory changes are implemented.

 

What Is CRM2?

  • New industry-wide regulations that improve how the financial industry reports and discloses information to investors

  • Changes are now being phased in, with full implementation across the industry by mid-year 2017. It includes two new reports: (1) account costs and (2) account performance.

  • Applies to all investment dealers and advisors in Canada, including: Investment dealers regulated by the Investment Industry Regulatory Organization of Canada (IIROC), such as RBC Dominion Securities

  • Firms regulated by the Mutual Fund Dealers Association (MFDA), such as the respective mutual fund distributor of each of the major banks

  • Investment counselling firms regulated by provincial securities commissions in Canada

 

Why Is CRM2 Being Implemented?

  • CRM2 is part of a global shift towards increased disclosure and transparency in the investment industry

  • To provide investors more details on the fees and performance of their investment accounts

  • To improve investors’ ability to assess how they are progressing towards their financial goals

 

How Will CRM2 Affect You?

  • CRM2 does not change the amount you are paying your investment firm; it only provides more detail to you about your account fees and performance.

  • All investors will receive more specific details on the cost and performance of their investments via:

    • Conversations with their investment advisors

    • More details on existing account statements and confirmations

    • Two new annual reports you will receive starting in 2017 for all investment accounts:

      1. An Annual Charges and Compensation Report, showing a detailed list of account fees

      2. An annual Investment Performance Report to provide details on how the account is performing using a “money-weighted” rate of return, rather than the more traditional “time-weighted” rate of return.  A few bullet points to explain the difference:

        • The timing of cash flows that you direct, such as contributions, transfers and withdrawals, can affect your portfolio’s rate of return

        • Time-weighted rate of return calculation does not include the effect of these cash flows

        • Money-weighted rate of return includes the effect of these cash flows

        • If there are no cash flows, the two methods will produce the same rate of return

 

If you have any questions about how the changes will affect you or about the costs and performance of your account, please contact me to discuss.


RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ®Registered trademarks of Royal Bank of Canada. Used under licence. © 2015 Royal Bank of Canada. All rights reserved.