Client account statements have long been a source of disappointment for financial advisors, and that trend has continued in 2014. But there are signs that things are starting to change for the better. Not only have firms been making changes, but the second phase of the client relationship model (CRM2) will require changes to client account statements by July 15, 2015 – changes that advisors have been asking for.

The improvement is evident in the performance ratings that advisors gave their firms in the “client account statements” category in this year’s Dealers’ Report Card. Overall, the average rating increased to 7.5 from 7.2, which shows that firms are making progress. Still, the category has the third-largest gap between the overall average performance rating and the and overall average importance rating (8.5), which means that firms are not meeting their advisors’ expectations. There are various reasons why that’s the case, but advisors said the No. 1 reason is the complexity and inscrutability of the client account statements.

“We get a lot of complaints,” says an advisor in British Columbia with Oakville, Ont.-based Manulife Securities of his firm’s client account statements. “They’re not very clear. Information spills onto the next page and people think investments are missing.”

“[The client statements] are a fair source of grief,” adds an advisor in Ontario with Markham, Ont.-based Worldsource Wealth Management Inc. “We spend a lot of time explaining the format or information to clients. It’s too complex in format.”

Advisors also were unhappy about delays in getting the statements out, unacceptable errors in reporting and information that clients expect but is missing on the statements.

“[The statements] need to include cost value and net invested, which is different from book value,” says an advisor in Ontario with Toronto-based HollisWealth Inc. “They don’t put the year-to-date performance or visual graphs for clients.”

“I would like to see more transparency on our statements,” adds an advisor on the Prairies with Winnipeg-based Investors Group Inc. “Many clients find the statements to be confusing and cluttered.”

One solution to making account statements with enhanced visual elements easier to understand for clients can be found in the push for electronic statements, which can contain more information.

“On the paper statements, [clients] get the regulatory minimum,” says Nelson Cheng, CEO of Windsor, Ont.-based Sterling Mutuals Inc., who estimates 60% of his firm’s clients are now receiving e-statements. “On electronic statements, because it’s free, we can give them a lot more information – more charts and colourful things to look at.”

Sterling Mutuals was rated very highly for its client account statements, at 8.4. The firm launched its e-statements in 2004 after building its own platform and system to put the e-statements together, Cheng says. In order to get clients to sign up to receive e-statements, the firm also devised creative incentives, including campaigns to give clients $5 to sign up.

“Do the math,” Cheng says. “Even if it’s a quarterly [paper] statement, that’s a $2 cost; times four, that’s $8. I’m going to spend $8 a year vs giving you $5 now and never having to spend money on it again.”

The firm also gives its advisors an incentive to get their clients to sign up for e-statements. Cheng says: “I tell [advisors]: ‘If you have at least 80% of clients on e-statements, we’ll pay for the other 20%.’ Once you start charging them for the paper statements, the advisors start to perk up a little bit and they go out and they get their clients signed up.”

But it’s not just the cost savings that make Sterling advisors keen on getting their clients to switch to e-statements. “They’re very good statements,” says a Sterling Mutuals advisor in B.C. “They show the rate of return, they’re accessible online and easy to read. They’re getting better every day.”

The inclusion of rate of return will be just one change that all firms will need to make to comply with CRM2. In fact, not having rate of return on account statements has long dissatisfied advisors and their clients.

“I get the most complaints from clients not understanding their statements,” says an advisor in Ontario with Toronto-based Assante Wealth Management (Canada) Ltd. “They want to see the rate of return.”

Says an Investors Group advisor in Ontario: “You need to sit down with a calculator to determine the rate of return. Apparently, improvements are coming.”

“Modifications are coming with the new regulations,” adds an advisor in Quebec with Montreal-based Peak Financial Group. “That will be good. We are due for an improvement.”

CRM2 will require firms to provide annualized total percentage returns and other information on client account statements, so the firms are working on informing their advisors about the new rules before they come into effect.

“We’ve held sessions and given seminars to advisors on what they should know and how to prepare for it,” says Robert Frances, Peak’s president and CEO. “We’re still involved in regulatory committees where we’re a part of the groups that are lobbying to have some clarity or have some changes on the rules.”

Now, with 70% of Peak’s clients receiving e-statements, the firm has made a big push over the past year to switch its remaining clients onto the more informative statements before the new CRM2 regulations come into effect. This, along with other improvements, such as adding past statements and client-specific documentation to its online system, are the reasons Peak advisors gave their firm the highest rating in the category, at 8.5.

Other firms, however, are still struggling to prepare their account statements to include the information that will be required as a result of implementing CRM2.

“The whole industry is grappling with this,” says John Novachis, executive vice president of corporate development with Mississauga, Ont.-based Investment Planning Counsel Inc. “We have to work together. There’s a lot of stakeholders involved in making something like that work. It’s going to be a collective effort.”

Firms are preparing for CRM2 in several ways, but it’s likely that advisors will welcome any effort to make account statements better. Many feel the current statements leave much to be desired.

“I tell clients to burn, shred or line their birdcages with them,” says an advisor in Ontario with HollisWealth. “They’re just legal requirements.”

© 2014 Investment Executive. All rights reserved.