As fund dealers implement the client relationship model (CRM 2) they and their advisors will be faced with new questions and challenges around how they work with their clients, according to Laura Paglia, partner, Borden Ladner Gervais LLP.

Paglia spoke as part of a panel at the third annual Federation of Mutual Fund Dealers’ Conference in Toronto on Tuesday.

She outlined some of the issues dealers can expect:

> How will advisors justify their value?
Once fees are disclosed to clients, advisors will be looking for more ways to add value to their services to justify those charges.

“Many advisors may be asking themselves, are they going to have to be doing more for less,” said Paglia. “They’re going to be searching for value-add activities to show their clients that the fees really are worth it.”

Advisors may consider adding value through more reporting, said Paglia. For example, advisors may send out more status updates on investments and the markets to clients, either through the mail or by posting it to a website. As well, advisors may start hosting more client seminars, writing blogs or using social media more efficiently.

As such, dealers may need to allocate more resources to supervision. “Not to say that advisors weren’t doing those [initiatives] already,” said Paglia, “but we can expect to see more of them and need to focus our energy on the supervision that’s required of those activities.”

> Do clients even want more value?
Dealers and advisors will have to ask themselves how they will handle clients who are happy with the status quo, said Paglia, and don’t necessarily want more contact or the services that might be necessary due to CRM 2 disclosure requirements.

“How, from a business perspective, do we deal with that reality?” asked Paglia.

> Should more clients get rebates?
Requests for fee rebates may become more commonplace once CRM 2 is implemented, said Paglia, particularly for advisors who want to keep smaller accounts.

“To keep a client relationship,” she said, “can you expect your sales people to come to you and say, ‘I want a rebate on this fee and I’ll take the hit’.”

> What are the regulatory risks?
Client complaints about fees could potentially increase due to the disclosure requirements of CRM 2, according to Paglia, which in turn means more attention from the regulators.

“We’ve seen complaints about fees before,” said Paglia. “But the question is, is that going to be more of a focal point of the investigations?”