New fee disclosure reports have had an overall positive effect on investor knowledge and behaviour, found a new study commissioned by the British Columbia Securities Commission (BCSC). Investors began receiving new charges and compensation reports, required under Client Relationship Model, Phase 2 rules (CRM2), in January 2017.
The BCSC’s three-part longitudinal study tracked investor knowledge and behavior before and after receiving the reports. It showed that 52 per cent of investors who had expressed having less confidence and investment knowledge at the outset of the study, increased their general understanding of fees after receiving their CRM2 reports. Meanwhile, investors who had expressed more confidence and investment knowledge at the beginning of the study, took action following the receipt of the new reports. Sixteen per cent engaged in new communication with their advisor, 25 per cent made a change to their fees or mix of investment products, and 11 per cent changed their firm or advisor.
A long way to go
This initial research on CRM2 shows that change in investor knowledge and behaviour has started, but we still have a long way to go," said Peter Brady, executive director of the BCSC, in an Oct. 2 announcement. "We want more investors to feel empowered and have important conversations with their advisors about their financial futures. We plan to continue our educational campaigns started last year that encourage investors to 'Take a Look' at their CRM2 reports."
After receiving the CRM2 reports, investors still had high trust in their advisors, dropping 3 per cent from the start of the study’s 83 per cent, the study found. For investors who reported that they did not receive CRM2 reports, trust dropped 10 per cent to 73 per cent. These investors also had a 15 per cent decline in satisfaction with the overall relationship with their advisor, and a 20 per cent drop in satisfaction with advisor communication.
Strengthening the client-advisor relationship
"CRM2 provides a great opportunity to strengthen the client-advisor relationship," said Brady. "Advisors should take the opportunity to help their clients be more aware of the new reports and help them understand the impact of fees on investments. Having a greater understanding of fees and investment performance benefits both parties."
For more information on BCSC’s research, visit: InvestRight.org.