What Is the Impact of CRM Phase 2? [Video]

By Adam Laird on July 17, 2015

CRM 2What Is CRM Phase 2?

On July 15th, 2016, investment advisors and firms will be required to disclose an annual report of charges, compensation and performance reports.

A client with a portfolio of $1,000,000 will compensate the advisory parties associated with the aforementioned investment product $25,300 per year, in addition to compensating the soliciting advisor $50,000 within the inaugural year if they should sell Deferred Service Charge investments.

What Is the Impact of CRM Phase 2?

The Client Relationship Model (Phase 2), “CRM2”, will drive radical changes to the Canadian financial advisory industry. To learn the history and background of CRM Phase 2, see our previous blog on the subject.

How Will This Change the Investment Industry?

The simple process of disclosing fees (direct and indirect) will encourage client migration within the financial services industry.

Explanatory Video


In Canada, the average management expense ratio (MER) found within a mutual fund and the largest held imbedded fee investment product is 2.53%. Typically, 1.00% will be given to the investment advisor to “service” the client on an annual basis and 1.53% will be taken by the mutual fund company executing the investment mandate. Commissioned advisors can also be paid up to 5.00% to lure investors into these products on a long-term basis.

Given the fact that the majority of investors are unaware of this compensation, great discrepancies are caused by a lack of disclosure and regulations found within the financial service industry.

For example, in 2014 over $6 billion was paid to Canadian advisors via the trailer fee. The 1.00% annual fee from the mutual fund company to the advisor, is to service the client while they stay invested.

CRM Phase 2 Will Bring these Figures of Compensation to the Surface

The creation and enforcement of the Client Relationship Model (Phase 2) is due to a realization from industry executives as well as national and provincial regulatory bodies that the basic standard of care and “fiduciary duty” of the financial services advisor needed to be enhanced.

When these figures of compensation are brought to the surface there will be great questions finally being asked.  The exposure of how greatly these financial advisors are compensated, has an industry on the cusp of great change.

>> HighView Financial Group is an investment counselling firm that takes a fiduciary approach to affluent family and foundation wealth. We are transparent and accountable in all that we do. Schedule a complimentary discovery session to see if we’re the right investment stewardship counsellors for you.

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Adam Laird

As Vice President & Principal at HighView, Adam Laird focuses on advising high net worth families about wealth management. He is an expert in CRM2 and a champion of goals-based, transparent, and objective investment counselling.
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