TORONTO, April 14, 2015 /CNW/ - The Investment Funds Institute of Canada (IFIC) today released two model reports – one on investment performance and the other on charges and other compensation paid to dealers/advisors – to help the funds industry deliver on Phase 3 of the new disclosure framework known as Client Relationship Model 2 (CRM2).
"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."
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.
"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," noted IFIC chair Brian Peters (president & CEO, MD Financial Management).
The industry is embracing CRM2 and collaborating to ensure its smooth implementation. A total of 135 people from 57 companies are working together on various IFIC CRM2 committees. The model reports were reviewed by staff at the Mutual Fund Dealers Association (MFDA) and their comments were incorporated.
"The model reports are the result of several months of work and demonstrate what can be achieved when stakeholders work collaboratively in the interest of the investor," noted IFIC chair Brian Peters. "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."
IFIC's model reports fully conform to CRM2 requirements and sample documents created by the regulators. The model reports are written for approximately a grade 8 level of reading comprehension.
Both model reports encourage investors to meet with their advisors regularly, and to ask questions about their products and services that will improve their understanding and help them make better financial decisions.
A companion guide will help dealers adopt the model reports effectively. It provides clarification regarding referral fees and the schedule of costs and notes that dealers should be sensitive to the visual needs of seniors in the design of their reports.
"CRM2 places Canada firmly ahead of the rest of the world in providing clear information to investors," De Laurentiis noted. "Canada's regulators and the industry should take pride in what we are on target to accomplish."
Phase 3 of CRM2 comes into effect in 2016. In most cases, the first reports on charges and performance will cover the period January to December 2016. Dealers can opt to meet the requirements by providing separate reports, or by integrating the information into their quarterly account statements once per year.
Earlier this month, IFIC released its CRM2 Dealer Checklist to help dealers prepare for Phase 2 of CRM2, which takes effect in December 2015. In July 2014, IFIC released plain language explanations of benchmarks and pre-trade disclosure of costs to meet Phase 1 requirements.
IFIC will release additional materials to assist dealers, advisors and investors with CRM2 in the months ahead.
The purpose of CRM2 is to ensure all investors receive timely, easy-to-understand information about the cost and performance of their investments. CRM2 is being phased in over three years. In 2014, dealers were required to disclose pre-trade costs and provide a general description of benchmarks. As of December 2015, dealers will be required to report on all investments and several changes will be required to account statements. In 2017, investors will receive a report showing the money paid to dealers on the investor's account during 2016. A separate report will tell investors how well their investments have performed in dollar terms and percentage terms over several time periods ending in 2016. Investors will receive these reports annually.
The Investment Funds Institute of Canada is the voice of Canada's investment funds industry. IFIC brings together 150 organizations, including fund managers, distributors and industry service organizations, to foster a strong, stable investment sector where investors can realize their financial goals. By connecting Canada's savers to Canada's economy, our industry contributes significantly to Canadian economic growth and job creation. The organization is proud to have served Canada's mutual funds industry and its investors for more than 50 years.
SOURCE The Investment Funds Institute of Canada
For further information: Sara Clodman, Senior Manager, Public Affairs, firstname.lastname@example.org 416-309-2317