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Disclosure has changed behavior, but more work remains to be done, says Paul Bourque

By Alain Thériault | April 30 2018 11:30AM

Paul C. Bourque

The CEO of the Investment Funds Institute of Canada (IFIC), Paul Bourque says that while CRM2 rules have changed investor behavior, more effective disclosure is required.

Speaking at a compliance seminar held last week by the Conseil des fonds d’investissement du Québec (CFIQ) – the voice of IFIC in Quebec – Bourque advocated for more complete and effective disclosure and says this is one of IFIC’s 2018 strategic priorities, along with protection for older investors, regulatory reform of professional titles and investment fund data collection.

CRM2 improves knowledge

"While it is early days, investor survey results are showing that CRM2 annual individual costs and performance reports are improving investor awareness of fees and performance and are leading to behavioural change,” said Bourque during his speech.

A survey conducted by Pollara on behalf of IFIC found that investors' knowledge of the fees they pay to their advisor increased from 69 per cent in 2015 to 78 per cent in 2017 for mutual fund unitholders. For investors who purchased mutual funds through a representative in the last year, this proportion increased from 72 per cent to 85 per cent between 2015 and 2017.

A lot of work to do

“We know however that much work remains to be done. For example, there is another element of cost disclosure that IFIC and other financial industry sector players have identified to make disclosure more complete and comprehensive,” said Bourque referring to CRM3.

This proposed expansion of disclosure requirements to fully reflect mutual fund management expense ratio (MER) was included in IFIC's response to consultation 81-408 on the option to discontinue embedded commissions. In addition to providing a more complete picture of the fees the mutual fund investor pays, CRM3 would allow investors to make more informed investment decisions, he says.

Include segregated funds

IFIC is currently working on an implementation plan for the industry to move to full cost disclosure, and is seeking industry consensus on what form the CRM3 statements should look like. "We will also continue to work with regulators and the Canadian Life and Health Insurance Association (CLHIA) so that insurance and securities full cost disclosure can proceed together as much as possible," added Bourque.

He reiterated his intention to include segregated fund assets and sales on the new Fund Reporting Intelligence System (FRITS) data platform. FRITS enhances IFIC’s ability to collect and manage and distribute data. IFIC plans to make several other enhancements to the platform, such as the inclusion of alternative funds data when they are launched as 81-102 funds.

 

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