Page 43 - April2015Spectrum
P. 43
DOLLARS & SENSE
What value does your financial advisor provide?
An explanation of the Client Relationship Model-CRM.
Thinking back 20 or 30 years to the days of ticker tape, the beginning banking side, at a mutual fund dealer, or various other types of financial
of mutual funds, boiler shop groups, and trading floors -the landscape of advisors. What are all these fees? The new CRM regulation takes that
the investment marketplace was completely different. When I began my question and makes it much more transparent for investors across the
career in the industry in 1994, regulation was not AS streamlined as it is board.
today. There was little thought given to things like kiting, money launder-
ing, front-running, arbitrage, or fraud. And the service that Advisors of- Another area of slow change has been the lack of a standard for help-
fered had more to do with executing transactions than with helping fami- ing you understand how well your portfolio is doing. Today, many advi-
lies achieve their financial goals. Since then the evolution of the industry sors report rate-of-return figures to their clients, but there has been no
has been dynamic. A new set of regulations called the Client Relationship obligation to do so until now. CRM also improves standards for when
Model (or CRM) can be thought of as the next step in that evolution. and how often Advisors must review client portfolios to ensure that the
investments held are suitable and appropriate.
Much of the change that has occurred in our business over the past few
decades has been driven by technology. Technology has allowed for things Here is a list of the main changes that CRM will bring about:
like the globalization of markets, improvements in commu- • improved account relationship disclosure, including
nication between market participants, innovation in invest- more information to investors on account types, the ser-
ment products (for example tax-advantaged mutual funds, vices they can expect to receive, as well as transaction and
ETFs), and huge changes in the speed of transactions. account fees and charges;
• enhanced suitability assessment standards to ensure
Technology has also dramatically driven down the value investments are appropriate to each investor's objectives
of executing a buy or sell transaction for a client. The first and time horizon, as well as to the composition and risk
step in that change was the introduction of discount invest- level of the investor's overall portfolio. Additional "trigger"
ing over the phone. After the phone it was online invest- events will also require that suitability assessment reviews
ing. Today investors that want a do-it-yourself transactional are conducted more frequently;
trading account can have one for very little cost. As a result, • the introduction of enhanced standards for the dis-
Financial Advisors have significantly enhanced the services closure and management of existing or potential conflicts
that they provide beyond transactional assistance. Today’s of interest between investors and their advisor and/or
Advisors (at least the good ones) provide a process driven firm; and
investment approach that begins with a detailed under- Erica Tennenbaum, CFP, FCSI • the introduction of requirements to provide clear
standing of many aspects of a client’s financial life, goals, Vice President & Wealth Advisor information on statements about the cost of investments
and risk appetite. Typically a plan is created with your goals and the performance of investor accounts.
in mind that takes into account tax, estate, retirement income, philan-
thropic, and risk mitigation strategies. Advisors help their clients imple- This change, for the most part has been embraced by the industry, but it
ment these plans, coordinate this planning with their clients’ other finan- has been a challenge for some firms to implement the new regulations
cial professionals, build and manage an appropriate portfolio, and provide since there are significant costs involved to comply. However for you as
regular reviews, contacts, and education to their clients. If you work with an investor, these new regulations should make it easier to understand
a good Advisor, you know that having a trusted professional to help you exactly what you are paying your Advisor, and what your Advisor is doing
navigate these complicated topics brings a lot of peace of mind. These for you and your family to earn those fees. Some of these changes have
changes have made our advisory business even stronger and improved the taken place , some are coming by year end and completion is expected
quality of the relationship for our clients and ourselves. for 2016. To me this once again improves the investor experience.
However there are things that have been slower to change. One is the Hope you enjoyed the article if you have any questions or suggestions
way in which Advisors are compensated. Most financial professionals please feel free to give our office a call at 519-621-1307
such as accountants and lawyers bill by the hour, but financial advisors do
not. Advisors may earn compensation from a variety of sources. Some- Erica Tennenbaum, CFP, FCSI │Vice President,
times these are transparent annual fees, but sometimes they might still be Wealth Advisor & Associate Portfolio Manager│RBC Wealth Management
commissions tied to executing transactions, or there might be fees tied to 301-231 Shearson Crescent, Cambridge Ontario N1T 1J5
holding certain products in your portfolio. To confuse things even further, www.ericatennenbaum.com
the types of fees differ in each area of the industry, whether it’s the on the Past President of the Rotary Club of Cambridge Preston Hespeler
Professional Wealth Management Since 1901
This informaion is not intended as nor does it consitute tax or legal advice. Readers should consult their own lawyer, accountant or other professional advisor when planning to implement a strategy. Erica Tennenbaum
is a Wealth Manager with RBC Dominion Securiies Inc. Member CIPF. RBC Dominion Securiies Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ®Registered trade-
marks of Royal Bank of Canada. Used under licence. © 2014 Royal Bank of Canada. All rights reserved.
www.cambridgechamber.com Spring 2015 43
What value does your financial advisor provide?
An explanation of the Client Relationship Model-CRM.
Thinking back 20 or 30 years to the days of ticker tape, the beginning banking side, at a mutual fund dealer, or various other types of financial
of mutual funds, boiler shop groups, and trading floors -the landscape of advisors. What are all these fees? The new CRM regulation takes that
the investment marketplace was completely different. When I began my question and makes it much more transparent for investors across the
career in the industry in 1994, regulation was not AS streamlined as it is board.
today. There was little thought given to things like kiting, money launder-
ing, front-running, arbitrage, or fraud. And the service that Advisors of- Another area of slow change has been the lack of a standard for help-
fered had more to do with executing transactions than with helping fami- ing you understand how well your portfolio is doing. Today, many advi-
lies achieve their financial goals. Since then the evolution of the industry sors report rate-of-return figures to their clients, but there has been no
has been dynamic. A new set of regulations called the Client Relationship obligation to do so until now. CRM also improves standards for when
Model (or CRM) can be thought of as the next step in that evolution. and how often Advisors must review client portfolios to ensure that the
investments held are suitable and appropriate.
Much of the change that has occurred in our business over the past few
decades has been driven by technology. Technology has allowed for things Here is a list of the main changes that CRM will bring about:
like the globalization of markets, improvements in commu- • improved account relationship disclosure, including
nication between market participants, innovation in invest- more information to investors on account types, the ser-
ment products (for example tax-advantaged mutual funds, vices they can expect to receive, as well as transaction and
ETFs), and huge changes in the speed of transactions. account fees and charges;
• enhanced suitability assessment standards to ensure
Technology has also dramatically driven down the value investments are appropriate to each investor's objectives
of executing a buy or sell transaction for a client. The first and time horizon, as well as to the composition and risk
step in that change was the introduction of discount invest- level of the investor's overall portfolio. Additional "trigger"
ing over the phone. After the phone it was online invest- events will also require that suitability assessment reviews
ing. Today investors that want a do-it-yourself transactional are conducted more frequently;
trading account can have one for very little cost. As a result, • the introduction of enhanced standards for the dis-
Financial Advisors have significantly enhanced the services closure and management of existing or potential conflicts
that they provide beyond transactional assistance. Today’s of interest between investors and their advisor and/or
Advisors (at least the good ones) provide a process driven firm; and
investment approach that begins with a detailed under- Erica Tennenbaum, CFP, FCSI • the introduction of requirements to provide clear
standing of many aspects of a client’s financial life, goals, Vice President & Wealth Advisor information on statements about the cost of investments
and risk appetite. Typically a plan is created with your goals and the performance of investor accounts.
in mind that takes into account tax, estate, retirement income, philan-
thropic, and risk mitigation strategies. Advisors help their clients imple- This change, for the most part has been embraced by the industry, but it
ment these plans, coordinate this planning with their clients’ other finan- has been a challenge for some firms to implement the new regulations
cial professionals, build and manage an appropriate portfolio, and provide since there are significant costs involved to comply. However for you as
regular reviews, contacts, and education to their clients. If you work with an investor, these new regulations should make it easier to understand
a good Advisor, you know that having a trusted professional to help you exactly what you are paying your Advisor, and what your Advisor is doing
navigate these complicated topics brings a lot of peace of mind. These for you and your family to earn those fees. Some of these changes have
changes have made our advisory business even stronger and improved the taken place , some are coming by year end and completion is expected
quality of the relationship for our clients and ourselves. for 2016. To me this once again improves the investor experience.
However there are things that have been slower to change. One is the Hope you enjoyed the article if you have any questions or suggestions
way in which Advisors are compensated. Most financial professionals please feel free to give our office a call at 519-621-1307
such as accountants and lawyers bill by the hour, but financial advisors do
not. Advisors may earn compensation from a variety of sources. Some- Erica Tennenbaum, CFP, FCSI │Vice President,
times these are transparent annual fees, but sometimes they might still be Wealth Advisor & Associate Portfolio Manager│RBC Wealth Management
commissions tied to executing transactions, or there might be fees tied to 301-231 Shearson Crescent, Cambridge Ontario N1T 1J5
holding certain products in your portfolio. To confuse things even further, www.ericatennenbaum.com
the types of fees differ in each area of the industry, whether it’s the on the Past President of the Rotary Club of Cambridge Preston Hespeler
Professional Wealth Management Since 1901
This informaion is not intended as nor does it consitute tax or legal advice. Readers should consult their own lawyer, accountant or other professional advisor when planning to implement a strategy. Erica Tennenbaum
is a Wealth Manager with RBC Dominion Securiies Inc. Member CIPF. RBC Dominion Securiies Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ®Registered trade-
marks of Royal Bank of Canada. Used under licence. © 2014 Royal Bank of Canada. All rights reserved.
www.cambridgechamber.com Spring 2015 43
