You have to spend money to make money. That’s some of the oldest advice in business.
Now, consumers looking to sweeten their financial future are getting a better idea of exactly how much money they’re spending to do that, thanks to new rules changing the way fees and performance are reported to investors.
Beginning in January 2017, revisions entitled the Client Relationship Model – Phase 2, mean fees won’t only be reported in percentages going forward, but also in dollars and cents. This is to give a clearer picture to both the experienced investor and the novice trying to figure out their monthly statements.
Wes Thomas, an Investment Adviser in Edmonton with Servus Wealth Strategies and Credential Securities Inc., explains that investors have always been told about fees, but in a percentage format. The new method of reporting adds transparency.
“A percentage doesn’t always translate the same as a dollar sign and it certainly doesn’t resonate to the same level with members,” he says.
“There’s going to be much greater clarity around rates of return for the investments that the member holds with us” through performance reports that will clearly show how their investments are performing.
New rules for the investment industry have been gradually rolled out by the Canadian Securities Administrators since 2014 to improve the experience of consumers when they invest. That organization brings together provincial and territorial securities regulators in the goal of promoting efficient and fair markets.
People should be reassured about one thing – the change in the reporting method is the only thing that’s going to happen in this case. At Servus, fees will stay the same, as will services associated with the account. The cost of the investment won’t rise.
Thomas says fees vary depending on the account and the type of investments it has. He adds that some accounts have already been showing the dollar amount for fees because of the way they are structured.
Thomas says he hasn’t come across any members who were surprised when the topic was raised.
Members understand that there are fees.”We’ve been having the right conversations with members prior to the changes in regulations. Because we’ve been having the right conversations, it’s not a surprise to members that we have bills to pay, we have salaries to pay, so there’s fees with holding of mutual funds.”
He’s quick to point out, however, that keeping members informed is the usual way of doing business at Servus, and one of the ways Servus advisers help members get good value for the fees they pay.
“It’s not a change in how business is conducted; it’s a change in reporting, so we’ve been very proactive in ensuring that we’re having upfront conversations,” he says.
Clarity about how investments are performing allows members to gauge their progress towards achieving their financial goals. By having this information reported in clear and plain language, the new rules are intended to help investors make more informed decisions.
“From my perspective,” Thomas says, “Those conversations always did happen as far as compensation and commissions (are concerned) because inevitably, that question comes up with a member. You might as well have it up front.”