CRM RESOURCES
IFIC members are making IFIC-produced CRM communications tools available
to all industry participants in the belief that consistent communication through
broad sharing of these materials is of benefit to investors.
Visit our website for resources to help advisors build their knowledge and talk to their
clients about the changes arising from CRM2 and the value that an advisor delivers.
Topics covered so far include information about rules that came into effect in July 2014.
This includes pre-trade disclosure and benchmark disclosure, including a plain language
description of benchmarks to share with clients.
New tools will be added over the coming months, including additional reports and issues
of the advisor-focussed information bulletin Advisor Insights.
Advisor Insights is in plain Word format so that dealers can apply their own branding to
the materials. An IFIC-branded version is also available.
IFIC members, can login to access the complete roster of member resources.
For more information, visit us at:
IFIC Members: https://www.ific.ca/en/guideline_topics/crm-communications-tools/
Non-Members: https://www.ific.ca/en/articles/member-centre-member-resources/
Advisor Insights
Benchmarks Disclosure
Effective July 15, 2014, dealers must provide a general description of benchmarks to their clients.
This requirement is part of the new rules prescribed by the Canadian Securities Administrators
(CSA). The rules are often referred to as CRM2, which stands for Client Relationship Model,
Phase 2.
What CRM2 means for mutual funds is that investors will receive timely, easy-to-understand,
detailed information about the cost and performance of their funds. In the first phase, effective
July 15, 2014, the industry must provide a description of benchmarks, and pre-trade disclosure
of costs. More information on pre-trade cost disclosure is provided in a separate issue of Advisor
Insights.
The benchmarks requirement can be met by adding a description of benchmarks in the
Relationship Disclosure Document. The description should be written in plain language
so that consumers at all levels of financial knowledge will understand the concept.
On page 2 is a description (also available in French) of benchmarks that IFIC has prepared
to assist you in updating your Relationship Disclosure Document and discussing benchmarks
with clients.
What’s ahead?
CRM2 is being phased in over three
The mutual funds industry supports
years. By July 2016, investors will begin
CRM2 and believes the changes will
to receive statements showing, in
allow investors to make better informed
dollar amounts, the costs associated
decisions about their investments.
with each of their products. A separate
Informed investors are more committed
statement will tell investors how well
to saving and creating a more secure
their investments have performed in
financial future for themselves and their
dollar terms and percentage terms over
families.
several time periods.
1
Information to share with your clients
What is a benchmark?
Important notes for clients
A benchmark is information that helps you
Investment benchmarks are usually a group of
compare performance.
securities known as a “market index”. One common
example is the S&P/TSX Composite Index.
Students compare their marks to the class
average to understand how well they did.
In the same way, an “investment benchmark”
A market index provides good historic information
but it isn’t a perfect comparison to your investment
helps you understand how well your
for three reasons:
investments performed.
1
Choosing the right
benchmark
You would not compare your math mark to the
class average on an English test. In the same
way, you must not compare your equity fund to
is important to use the right one. Some funds
do not use benchmarks. A fund that uses
a benchmark will list it in its Management
Report of Fund Performance. You can get this
report online. You can also ask your advisor for
this information.
of managing and operating a mutual fund.
To compare your mutual fund to a benchmark,
subtract the fund costs from the benchmark.
2
A market index measures performance over a
specific time period. If you held the mutual fund
over a different time period, it will not be
a benchmark for bond funds.
There are many different benchmarks and it
A market index does not reflect the costs
a perfect match.
3
Benchmarks use a “time-weighted” formula
to calculate performance. The statement that
you will receive after 2016 will use a “moneyweighted” formula to calculate your return.
For these reasons, your return might not
mirror the benchmark for the fund.
If you have questions, speak to your investment advisor or visit www.ific.ca/investor-centre.
Prepared by
Connect with us
www.ific.ca
@IFIC
The Investment Funds Institute of Canada
2
Advisor Insights
Pre-Trade Disclosure
Effective July 15, 2014, clients must be advised of the costs (immediate or deferred) associated
with the sale or purchase of a security, including mutual funds, investment funds and ETFs.
This requirement is part of the new rules prescribed by the Canadian Securities Administrators (CSA).
The rules are often referred to as CRM2, which stands for Client Relationship Model, Phase 2.
What CRM2 means for mutual funds is that investors will receive timely, easy-to-understand, detailed
information about the cost and performance of their funds. In the first phase, effective July 15, 2014,
the industry must provide a description of benchmarks, and pre-trade disclosure of costs.
More information on benchmarks disclosure is provided in a separate issue of Advisor Insights.
Q
: What costs
must be disclosed?
The following costs must
be disclosed:
•T
he charges your client will
pay for the purchase, or a
reasonable estimate if the
actual amount is not known
at the time of disclosure,
•D
etails of any deferred
charges that the client might
be required to pay, including
the fee schedule that will
apply,
•A
ny trailing commissions
that will be received.
The CSA has recommended
that advisors explain the
following terms to their clients
during pre-trade disclosure.
This information can be found
in the Fund Facts:
The following items are not
included as part of pre-trade
disclosure:
• Management fee
• Margins that cannot be
attributed to a specific
transaction
• Sales charge or deferred sales
charge option available to the
client
• Account operating charges
• Foreign exchange spreads
• Any other redemption fees or
short-term trading fees that
may apply
• Trailing commission, or other
embedded fees
• Options regarding front end
loads
• Fees related to the client
changing or switching
investments
1
Q
Q
Disclosure can be provided in writing
Your dealer will have a process for documenting
or through a discussion.
client discussions. At a minimum, you should
: How is the disclosure
to be made?
: How should the disclosure
be documented?
record in your client record the topics that you
Reviewing the Fund Facts with your client
have discussed.
is an acceptable way to meet the pre-trade
disclosure requirement. In particular, focus
on the section How much does it cost?, which
describes sales charges, fund expenses
(including trailing commission) and other fees.
In addition, make reference to the section
A word about tax.
What’s ahead?
CRM2 is being phased in over three years. By July 2016, investors will begin to receive
statements showing, in dollar amounts, the costs associated with each of their
products. A separate statement will tell investors how well their investments have
performed in dollar terms and percentage terms over several time periods.
The mutual funds industry supports CRM2 and believes the changes will allow
investors to make better informed decisions about their investments. Informed
investors are more committed to saving and creating a more secure financial future
for themselves and their families.
Prepared by
Connect with us
www.ific.ca
@IFIC
The Investment Funds Institute of Canada
2
CHANGE IS COMING
CRM2: A New Era in Investor Information
The goal of CRM2 is to provide investors with timely, easy-to-understand, detailed information about
the cost and performance of their mutual funds. By 2016, investors will receive statements showing, in
dollar amounts, the costs associated with each of their products. On the performance side, investors
will see how well their investments have performed in dollar terms since they started to invest, and
their percentage rate of return over several time periods.
CRM2 will lead to more informed investors, which will result in better conversations between investors
and advisors. The industry is embracing the changes, and collaborating to ensure their smooth
implementation. IFIC is creating a repository of information to help advisors across the industry
prepare for implementation.
The new rules are being phased in over three years. Key measures begin to take effect on the dates
indicated below.
Key Implementation Dates
Date
Status
Requirements
July 15, 2013
• Rule goes into effect and transition timeline established.
July 15, 2014
• Include benchmark information in relationship disclosure document.
• Disclose fees before a transaction (pre-trade disclosure).
July 15, 2015
• Include book cost or original cost on statements.
• Record necessary information to generate performance report.
July 15, 2016
• Provide performance report showing percentage rate of return
for various time periods using a money-weighted calculation.
• Provide cost disclosure report showing in dollars and cents all
fees and charges paid in the year and total trailer commissions
received by the dealer in the year.
Dec. 31, 2016
• First performance and cost report to be delivered. (For firms
using a year-end date for performance report)
For more information, visit us at:
IFIC Members: https://www.ific.ca/en/guideline_topics/crm-communications-tools/
Non-Members: https://www.ific.ca/en/articles/member-centre-member-resources/