What is the CRM2?

No, CRM2 is not C3PO’s less talented cousin. It is in fact an acronym for the Client Relationship Model Phase 2, the financial services protocol that became Canadian law in July 2016 and brought a greater degree of transparency into our investment industry, which has earned the dubious distinction of boasting the highest average management fees of any industrialized country.

Canadian investors, on average, fork over a whopping 2.4% of their managed assets every year, regardless of how well their investment advisors have done for them. (From 2007-2017, the overall market produced average annual returns of about 6% — so taking 2.4% right off the top obviously takes a huge bite out of your gains.) For the first time, investment advisors would be required to clearly inform clients exactly how much they would be paying in fees. And by insisting on one easy-to-understand term called the Management Expense Ratio (MER), that covers all of a fund’s operating fees, the Ontario Securities Commission eliminated the ability to hide some sleight of hand fee grabs, like trailers (finance jargon for sales commissions.)

As crazy as it might sound, before these regulations there was absolutely no legal requirement for your advisors to clearly show you the performance of your investments. Now, thanks to the CRM2, it’s literally all in black in white, since your investment advisor will now be obligated to provide an annual report that details the fees you’ve paid as well as an Investment Performance Report showing how your accounts have performed using a money-weighted rate of return.