The implementation of the phase two of the Client Relationship Model (CRM 2) can be a positive business move for advisors and the firms who have the right mindset about the new rules, according to Prema Thiele, partner, Borden Ladner Gervais LLP.
“CRM can enhance your client experience if you plan now and you take an approach to these rules that’s a little bit different then what you’ve been doing with other legal pronouncements,” said Thiele, who spoke at a CFA Society Toronto event on Monday. Firms who procrastinate, however, will find it costly to catch up and are also at risk running afoul of the regulators.
Part of this new approach includes advisors and their firms taking responsibility themselves for the implementation of CRM 2 as to relaying on third parties. Many dealers believe that because their service providers are working on these new rules they don’t have to do anything and can deal with issues simply on an “as-needed basis”, said Thiele, but that is not the case. “The responsibility isn’t in the systems,” she said. “All of you that are facing the clients … everyone has to understand these rules and what we’re trying to achieve.”
Furthermore, advisors and firms shouldn’t even depend on CRM 2 documents provided by regulators. For example, as part of the new rules, new reports must be sent to clients, one on operating costs and the other on the market value of a client’s account, as of July 2015 and July 2016 and regulators have provided templates for these reports. However, Thiele advises against using these forms for anything other than educational purposes.
“[Using the template] is going to be a real cop-out for the industry,” said Thiele. “If we’re going to make this user friendly…take the time now to think about the approach of this report.”
These reports should be personalized to each client and detail which charges specifically have been applied to the account. It’s not enough, said Thiele, to simply disclose the firm’s entire menu of charges.
Furthermore, to really improve the client experience, Thiele recommends firms consider applying CRM 2 disclosure to all aspects of their businesses. CRM 2 only applies to securities, said Thiele, and insurance products, such as segregated funds and principal-protected notes (PPN), are excluded from the disclosure requirements. However, firms should examine the costs of implementing CRM 2 to see if it’s viable to apply the new rules to their entire suite of products.
“If we’re trying to change the client experience,” said Thiele, “you want the entire experience to be changed so [clients] can understand all of your products.”