“I was surprised by the amount of fees. Didn’t realize the amount until someone added it up for me.”


I saw a poster in an elevator the other day with a great line: “the power of being understood”. It was an ad for an accounting firm, but the words struck me as being applicable to CRM2 reporting.

Many firms have placed so much emphasis on compliance that they have missed the broader goal of making the performance and fee information more understandable to investors.

This year’s CRM2 fee and performance reports have already started arriving. My own experience suggests that, once again, the key messages may not be getting through to investors.

What are the barriers to understanding for investors?

The information is difficult to find. The fee and performance information can be difficult to locate in many reporting packages. For one of my accounts, I found the fee and performance reports on page 9. How many clients will take the time to search for this information… or even know what to look for?

The reporting is complicated. Even when an investor does find the information, it’s not always designed to be easily understood. As an industry, we often use acronyms and “inside baseball” terms that are unfamiliar to many investors. We present information without context, and without thinking of what an investor wants it for.

Investor reactions to CRM2 reports

I’ve had the good fortune of doing research with investors for a number of large dealer firms. We’ve asked investors about their reactions to their fee and performance information, and tested their understanding. Their reactions were fascinating.

Investors are still surprised by their fees. 

An industry insider emailed me the other day to say he’d just received his CRM2 report. His reaction: “I was surprised by the amount of fees. Didn’t realize the amount until someone added it up for me.”

Indirect fees are particularly confusing.

Investors are confused by indirect fees. They’re not sure who pays them, or who gets paid.  “Trailing Commissions” are a mystery as well. For most investors, this term is absolutely meaningless. If they make any connection at all, they think it refers to the MER of a fund.

Value of the dealer vs advisor.

CRM2 fee reporting often suggests to investors that their advisor is receiving all the fees.  If it’s clear that the dealer firm receives the fees, investors often wonder about the value provided by the firm. Their relationship is solely with the advisor, and they don’t appreciate what the firm brings to the table.

Performance reporting hitting the mark. 

In general, investors are doing a bit better with understanding performance reporting. In fact, they’re grateful to see how they’re doing, the market value of their investments (in dollars), and what it was previously.

Inception date is puzzling. 

But, when they see that reporting starts on an “inception date”, investors assume that’s when they opened their account. When they realize “inception date” can’t be their account opening date, they’re confused and want to understand why the reporting starts then. Our somewhat-helpful footnotes don’t always provide the answers.

What’s a money-weighted rate of return?  

It should be no surprise that investors don’t follow the detailed technical explanation of the calculation. But they also don’t have context for the returns. Inevitably, someone they know has had better returns, so they’re left wondering if they should be doing better.

While CRM2 is a step forward, my research shows that the disclosure hasn’t yet resulted in increased investor understanding. There’s clearly an opportunity – some would say a need – for a conversation, to make sure clients aren’t left wondering whether they’re getting good value for their fees. Also, clients crave transparency around performance and fees.  Not just here in Canada, but around the world. Global studies indicate that transparency of performance and fees is the top driver of client trust.

So we’ve got some work to do … but it can be done. We can focus on improving our CRM2 reporting. We can support the reporting with transparent client conversations. This will lead to better, stronger, and more trusting client relationships … and it’s undoubtedly going to be more cost-effective for dealer firms as well.

How’s that for the power of being understood?

If you’d like to harness the power of being understood for your clients, feel free to get in touch with me at Susan.Silma@PureFacts.com.

Practice Leader, Client and Industry Strategy