Investment performance and the cost of advice

The Canadian Securities Administrators (CSA) have introduced new requirements to ensure investors receive essential information about the cost of their advice and how their investments have performed. These requirements are also known as phase 2 of the Client Relationship Model, or CRM2.

5 ways new rules will help you keep track of the cost of advice and investment performance

The new rules apply to all dealers and advisers registered to tradeTrade The process where one person or party buys an investment from another.+ read full definition in securities or provide advice and have been phased-in over a three year transition period from July 2014 to July 2016. Here are some key ways the new rules will help you:

  1. More information about transactionTransaction The process where one person or party buys goods or services from another for money. Examples include taking money out of an account, buying something with a credit card or taking out a loan.+ read full definition and operating fees
  2. More information about commissionsCommissions What you pay to a broker or agent for their services. Often called a “sales commission”. For example, you pay a fee to someone who buys or sell stocks or real estate for you.+ read full definition and other fees paid to your dealer or advisor
  3. More information about the performance of your investments
  4. Standard information and calculations
  5. Clearer information about scholarship planScholarship plan A type of Registered Education Savings Plan (RESP) that pools together the money of many investors. An investment manager invests the money for you, often in lower-risk, fixed-income investments such as bonds and GICs. Enrolment fees are often high and there may be strict rules.+ read full definition investments

Key dates for new requirements

As of July 15, 2014

  • Pre-trade disclosure of charges – Your firm must tell you the charges you will have to pay when purchasing or selling investments.
  • Trade confirmationTrade confirmation You receive a trade confirmation after you buy or sell an investment with the investment name, fees and commissions.+ read full definition disclosure for debtDebt Money that you have borrowed. You must repay the loan, with interest, by a set date.+ read full definition security transactions – Your firm must tell you the payments they have received from debt security transactions.
  • Explanation of scholarship plan risks – At the time of purchase, your scholarship plan dealer must discuss the risks of potential loss of contributions and earningsEarnings For companies, it’s the money they make and share with their shareholders. For investors, it’s the money they make from their investments.+ read full definition.

As of December 31, 2015

  • New account statementAccount statement A summary of the activity in your account over a period of time. This includes money that you put in and take out, investments that you buy and sell, and fees that you paid. Statements are typically provided monthly, qarterly or annually.+ read full definition You will get quarterly accountAccount An agreement you make with a financial institution to handle your money. You can set up an account for depositing and withdrawing, earning interest, borrowing, investing, etc.+ read full definition statements that include a record of all transactions carried out during the reporting period and information about investments held by your advisor or dealer.
  • Additional statement – You will get quarterly account statements that include information about investments not held by your dealer or adviser. This statement is given if your adviser or dealer has trading authority, receives a trailing commission or other ongoing payment, or if the investments are issued by a scholarship plan, mutual fund or labour-sponsored fund.
Additional statements

If your investments are held by a party other than your dealer or adviser, you will receive “additional statements” that include information that generally corresponds to the information in the account statements required by firms that do hold client assets. The statements will include:

  • Name and quantity of each investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition
  • Market valueMarket value The value of an investment on the statement date. The market value tells you what your investment is worth as at a certain date. Example: If you had 100 units and the price was $2 on the statement date, their market value would be $200.+ read full definition of each investment
  • Total market value of each investment position
  • Cash balance (if any)
  • Total market value of cash and investments
  • Name of the party that holds each security
  • In some circumstances, whether the investments are covered under an investor protection fund
  • List of investments that may be subject to a deferred sales chargeDeferred sales charge A sales fee that you pay when you sell an investment. Also called a “back-end load.” The fee often goes down the longer you hold onto the investment+ read full definition.

As of July 15, 2016

  • Deferred sales charge in trade confirmation – Any deferred sales charges when you sell the security must be included in your trade confirmation.
  • Report on charges and other compensation You will get an annual reportAnnual report A financial report that a company prepares for its shareholders each year. Includes a balance sheet, financial statement, auditor’s report, and information about the company’s operations and financial situation.+ read full definition that includes detailed information on charges and fees paid to your dealer or adviser for your account.
  • Report on investment performance You will get an annual performance report that explains how your investments have performed over specific periods of time.

Discussion of the newest cost and performance requirements, as well as examples of the annual charges and compensation report and investment performance report are available from the Ontario Securities Commission (OSC).

Take action

Learn more about the new Report on Charges and Other Compensation and the Report on Investment Performance.

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