With tougher, new client reporting requirements due to take effect next year as part of the second phase of the Client Relationship Model (CRM2) reforms, the Investment Funds Institute of Canada (IFIC) has unveiled a couple of model reports that fund dealers can follow to ensure they are meeting their stepped up disclosure obligations.
IFIC released a pair of model reports Tuesday that address the final, and most significant, component of the CRM2 reforms.
The report on investment performance will help investors understand whether they are on track to meet their financial goals by showing the investor’s personal return – in dollars and percentages – based on their individual contributions and withdrawals and on changes in market value that have occurred in the account.
The report on charges and compensation will tell investors how much has been paid – in dollars and cents – to their dealer firm for the services that the investor received.
The model reports — which were developed by IFIC staff and fund dealers, with input from the Mutual Fund Dealers Association of Canada (MFDA) — are intended to help the industry meet their new disclosure obligations, which are slated to take effect in July 2016. IFIC notes that dealers can meet those new requirements by providing separate reports, or by integrating the information into their quarterly account statements once per year.
“For most investors, these two reports will mark a sea change in the way information about their investments is presented, said Joanne De Laurentiis, IFIC’s president and CEO. “IFIC’s model reports are designed to meet both the letter and the spirit of the rules. We have taken the raw templates prepared by the regulators and further simplified the language, created easy-to-follow layouts, and added plain language explanations of many of the terms.”
In addition to the new reports, IFIC also issued a companion guide to help dealers use the model reports effectively. Among other things, it provides clarification on certain issues, and offers suggestions on design elements for these reports. The model reports are written for approximately a grade 8 level of reading comprehension, IFIC says.
“A consistent approach to implementation of CRM2, using tools such as IFIC’s model reports, will help empower investors through better information and education, and ultimately lead to stronger investor-advisor relationships,” said IFIC chair, Brian Peters, who is also president & CEO of MD Financial Management. “We encourage all dealers – IFIC members and non-members alike – to adopt language and an approach that is consistent with these model reports, in order to promote investor understanding.”
Earlier this year, IFIC published a CRM2 checklist for dealers designed to ensure that firms are prepared for the CRM2 requirements that take effect at the end of 2015.