How client awareness of CRM2 benefits advisors

By Staff | August 16, 2018 | Last updated on August 16, 2018
3 min read

Those CRM2 discussions you’re having with clients? How effective they are differs depending on survey results, but what’s clear is the discussions are important.

A new study from J.D. Power says most Canadian investors (79%) are unaware of CRM2, which has been in full effect for more than a year. Survey respondents were asked, “Have you heard about CRM2?”—a term that likely isn’t a household name.

This follows a Pollara report commissioned last year by IFIC, which found that awareness of advisor compensation increased among those who purchased a mutual fund through an advisor, jumping from 72% in 2015 to 85% in 2017—awareness by all mutual fund investors rose to 78% in 2017 from 69% in 2015. However, only 16% of investors reported being very confident in knowledge of fees paid.

But, also last year, the BCSC found that 41% of investors surveyed said they agreed at least partly with a statement saying they knew about CRM2 fees, up from 34% in 2016.

Where a lack of investor awareness is evident, that’s a potential problem for advisors and firms. As the J.D. Power study suggests, the best way to address the risk of clients leaving because of fee and performance reporting is proactive disclosure and regular discussions.

Read: Proactively discuss fees and your value proposition with clients

Investors who are aware of CRM2 and have noticed changes in reporting format, and who have had their advisors explain fees within the last year, are more loyal to their advisory firms, for example. More than half of this group of investors (58%) said they “definitely will” remain with their firms for the next one to two years, the J.D. Power study says, versus 46% of investors overall.

Investors who are aware are also more likely to recommend their firms, finds the study (53% versus 37% of investors overall). And, as would be expected, informed investors are more likely to understand their fees, with 55% indicating “complete understanding” versus 32% of investors overall.

In the BCSC study, client trust in advisors dropped 10 percentage points to 73% for clients who reported not receiving the new statements with CRM2 reporting (though chances are they probably had in fact received them).

Read: How to avoid losing a client’s trust

The fee discussion clearly has room for improvement, but it’s also subject to change for some investors: in April, the MFDA proposed total cost disclosure in a discussion paper for which comments closed last month.

Serving clients of different generations

In addition to facilitating clear CRM2 discussions, advisors might also consider how best to serve clients of different ages.

For example, more than one-third of millennials (investors aged 24 to 36) said they consider themselves validators, finds the J.D. Power study, meaning they consider their advisors as sounding boards for their own ideas. About one-quarter of boomers—investors aged 54 to 72—consider themselves validators.

A collaborative advisor-client relationship might help serve these client groups and many others. The study says only 15% of boomers and 10% of millennials consider themselves delegators, who cede all decisions to their advisors.

When it comes to technology such as robo-advisors, awareness is comparable among the generations, but millennials are more likely to adopt technology, the study finds, with 22% saying they use robo-advisors—that compares to 3% of boomers and 9% of gen-Xers (investors aged 42 to 53).

More than half of millennials using robo-advisors said they do so for lower fees (52%).

The study says a low adoption rate of mobile apps for wealth management is probably a result of low client satisfaction when using such apps versus using phone or web services.

The top-ranked advisory firm based on survey respondents’ overall ratings of satisfaction is Edward Jones, with a ranking of 799, followed by Assante Wealth Management (796), and HollisWealth and National Bank (794 each). The industry average is 785.

About the J.D. Power study: The 2018 study measures overall investor satisfaction with full-service investment firms and financial institutions that offer wealth management and private banking services. The study was fielded in May and June 2018 and is based on responses from more than 4,400 investors who work with financial advisors on their primary investment accounts.

Also read:

Are clients too focused on returns?

Move over CRM2: MFDA proposes total cost disclosure staff


The staff of have been covering news for financial advisors since 1998.