Susan Silma's CRM2 Challenges and Solutions

April 11, 2016/ Mackenzie Investments

Who better to discuss the challenges advisors may face in the final phase of CRM2 than industry thought-leader Susan Silma, co-founder of CRM2 Navigator? As an integral figure in CRM2’s development and launch, Susan was able to provide meaningful insights into the background and rationale for the CRM2 regulation last week. This week, in part two of the series, she defines the challenges advisors may encounter and offers some words of advice:

"As part of my work at CRM2 Navigator, we have done a great deal of client- and advisor-facing research. We have seen first-hand that the information to be provided to investors through CRM2 will pose quite a challenge to many advisor-client relationships.

While advisors may believe they have been fully transparent about their fees, clients do not remember those conversations as clearly as their advisors may think. As a result, much of the fee information will feel new to clients.  In addition, clients may be confused by some of the terms they will see in their CRM2 fee reports. It is common for firms to use terminology that is relevant to us in the industry, but is not well understood by clients. As a result, the fee report will be difficult for many clients to comprehend, especially the section on third party compensation. Speak to your clients about fees and performance now. Pre-empt the surprise your clients will feel when their CRM2 reports arrive, and use every opportunity to communicate with them. The number one complaint clients have about their advisors is that they do not hear from them often enough.

As I mentioned last week, 2016 is a year of a lot of regulatory change, with POS3 and the final phase of CRM2 being implemented within a very short time of each other. I encourage advisors to use the Fund Facts document as an aid in their CRM2 pre-trade cost disclosure conversations. It is an ideal prop to support meaningful conversations with your clients about fees, and will help them better understand the costs of investing.

The final challenge that advisors may face is communicating their value. We have found that many advisors do not understand their own value or have a well-defined value proposition. Even if they do have a good value proposition, the vast majority of the time, they do not communicate it well. Be sure that you understand your value story and can articulate it well. Make sure your clients know what you do to earn the fees they pay."