As CRM2 deadline pressures mount, it’s important to remember the new rules are a client-focused initiative. Routines at the heart of client-advisor relationships, such as personal planning reviews, will change for the better. And clients will be asking new types of questions, especially about account costs and performance. Planning ahead will allow you to strengthen your value proposition.

Read: CRM2 could cause irrational client behaviour

Here are five key areas that should be top of mind.

#1. Original Cost vs. Book Value

On quarterly client statements (deadline: Dec. 31, 2015), firms will have a choice of reporting position costs using either original cost or book value.

Shortly after the first quarterly statements are delivered, firms should anticipate inquiries and complaints. Well before December 31, 2015, firms should anticipate common pain points and develop FAQs to address them. For example:

  • Can I use the position cost for Revenue Canada reporting purposes?
  • How was the position cost determined?
  • I do not agree with the position cost, and would like to change it.

Read: How CRM 2 affects clients’ tax filing

Resolving cost-basis reporting issues will help both advisors and clients clarify differences between book and market value, in preparation for the new Annual Performance Reports that take effect July 15, 2016.

#2. Client-Name Securities

By December 31, 2015, firms must provide an additional statement to clients identifying client-name securities which are not held at the dealer. A common example of this type of holding is a fund held at a mutual fund company in the client’s name, through which a dealer receives a trailing commission. The statement must identify the party that holds or controls these securities and how they are held. For many clients, this information will be unfamiliar and raise questions, which advisors will need to address. For example:

  • Why aren’t client-name securities integrated into my asset allocation program?
  • Are securities held at mutual funds covered by CIPF/MFDA IPC insurance? (They aren’t, and perhaps this is a reason to transfer the holdings to the Dealer in a nominee account.)

#3. New Performance Report Formats

Looking ahead to 2016, the annual Performance Reports will create challenges to format data effectively. The presentation must make sense to the investor.

The format you choose for performance-related data, graphs and explanatory notes will become an integral part of the clients’ investment experiences. They will also impact the expectation you set and the quality of service you deliver.

Read: How young advisors can take advantage of CRM 2

Long before the deadline for annual Performance Reports, advisors should be trained and provided with client communication scripts (e.g., FAQs) to answer performance-related questions. You should also consider sales ideas for re-engaging clients, revisiting performance goals, and possibly capturing more assets per account.

#4. Digital Relationships

Will CRM2 make a firm’s costs of delivering client communications higher or lower? The answer could depend on your communication strategy for paperless e-relationships. Here is a partial list of the new or expanded reports and disclosures taking effect through CRM2:

  • Comprehensive client statements (quarterly)
  • Report on Charges and Other Compensation
  • Investment Performance Report

In total, Canadian dealers may need to print and mail an extra 10 to 20 pages per client, per year. That could mean up to $50 million in extra hard-copy cost for the industry as a whole.

Many advisors do not consider going paperless a high priority. CRM2 presents a new reason and an opportunity to encourage investors to switch to e-delivery.

#5. Addressing Relationship Value and Costs

In 2016, clients will see, for the first time, an annual accounting of the fees and expenses they are paying to dealers. Since this will include compensation received from third parties, it will generate new types of questions you should be able to address with concise, accurate answers.

Boilerplate disclosures will not be enough to address cost concerns. Advisors should be ready to explain the new cost disclosures well before clients receive them. Advisors will also need desktop tools for drilling down on the details of underlying cost questions, such as, “How are trailing commissions from investment fund managers calculated?” and “Why is there a commission earned on a purchase of a DSC fund?”

Read: How to explain MERs and TERs

In addition, advisors should be prepared to emphasize the many ways they add value to their client relationships. The Advisor Value Proposition Checklist below can be helpful.

Advisor Value Proposition Checklist

The checklist summarizes benefit statements you can refine to suit your practice.

Accessibility – I am available on short notice to answer your questions or resolve service issues.

Asset servicing – I will help you track interest payments, dividends, distributions and corporate events such as stock splits.

Continuing education/accreditation – I can help you stay abreast of changing laws, regulations and professional best-practices.

Estate planning – We can work together to coordinate asset titles, lifetime gifts and bequests to fulfill wishes for tax-efficiency and leaving a legacy.

Market updates/continuous communication – You can expect me to stay informed about important events affecting your planning and portfolio, so that I can offer you timely ideas and planning adjustments.

Read: CRM will improve client decisions: IIAC

Personal reviews and asset reallocation/rebalancing – I will keep your portfolio aligned with your investment planning guidelines through changing life phases and markets, and help you maintain a proper risk/reward balance base on your objectives and goals.

Product due diligence/monitoring – To learn about new products and their planning applications, I read professional publications and maintain continuous communication with product representatives.

Tax efficiency/optimization – I will help you manage and minimize the impact of investment transactions and income on your tax liabilities.

Working with other advisors – By communicating with your legal counsels, accountants, and other advisors, I can coordinate your investment planning with other facets of your life and business.

Quick-Reference Guide to CRM2 Success

Planning Checklist
Advisor communications for establishing book value/original value
FAQ on book value/original value
FAQ about client-name securities
Decisions regarding graphics and printing costs in new statements and reports
Incentives for advisors to advocate for paperless communication
Scripts to help call-center staff answer clients’ questions
Development and testing of new formats for annual performance reports
FAQ to address questions about account performance reporting
FAQ on operating and transaction fees and compensation reporting
Advisor communications for re-engaging clients and capturing more assets
Advisor training and desktop tools for drilling down into performance, charges and compensation details
By Paul Strijckers, vice president of Business Solutions at Broadridge Financial Solutions.