The financial landscape is continuously evolving, and the Client Relationship Model, Phase 2 (CRM2), has been an integral part of this change. Created by Canadian Securities Administrators (CSA) as a set of rules for the Canadian investment industry, CRM2 outlines requirements for essential information about the performance of investments and fees to be provided to investors. Since coming into effect in 2014, this regulation has had profound implications for the industry, driving transparency and reshaping client-advisor relationships. 

Not only that, it has paved the way for future regulatory measures that will help keep investors informed, such as Total Cost Reporting (often referred to as CRM3 or TCR), which will come into effect in 2026.

While CRM2 mandates disclosure of what advisors earn, reveals embedded costs, and keeps investors informed of their portfolio’s performance, CRM3 builds on that foundation by enforcing additional measures to give investors notice of a wider range of expenses that come with owning funds and securities. For example, including management expense ratios (MERs), and trading expense ratios (TERs) in both percentage and dollar terms for annual reports.

While CRM2 and CRM3 are meant to help investors better understand the fees they pay and the value they receive from their investments, firms have been looking for ways to maintain client trust by managing investor data and formatting it into comprehensive reports. Using technology to address this has been a crucial part of keeping up with reforms, but how has it helped, and what progress can still be made to remain transparent and efficient?

Overview of CRM2 effects on firms and clients

The implementation of CRM2 underscores the importance of transparency and accountability in fostering trust and collaboration between advisors and clients. The requirements for annual charge reports, account statements, and performance reports mean that advisors and wealth management firms need to work with investors to help them better understand their portfolio’s performance, what firms or advisors will be receiving in return, and how it relates to their goals for the future. 

Additionally, seeing statements that clearly display the fees and expenses from partnering with specific firms or advisors can raise questions for investors about whether they’re working with the right firm, or if other alternatives are more transparent or lower-cost. 

With more regulations coming, these CRM requirements will continue to affect the inclusion or exclusion of certain products, as well as additional annual reporting and flexibility when calculating reported amounts, all to deliver information to investors with more transparency.

The Central Role of Data in CRM2 

The effective management and presentation of data is at the core of CRM2 and maintaining credibility with clients. CRM2 mandates comprehensive reporting across several data sets, all of which must be integrated into a single, cohesive report tailored to the client. Here’s a breakdown of the key data elements involved:

Household and Account Information

Clients often have multiple accounts, each containing various types of investments. CRM2 requires that all these accounts and their respective investments be reported together. This holistic view ensures that clients have a complete understanding of their financial position.

Detailed Fee Reporting

CRM2 also requires an annual report that meticulously outlines the exact dollar fees the client pays throughout the year. Since clients might participate in different investment programs across various accounts, each with distinct fee structures, this reporting must be precise and detailed.

Investment Returns

Reporting investment returns under CRM2 involves two key metrics: time-weighted and money-weighted rates of return. Performance reporting must be adjustable to the level of the client’s accounts, which can be on a household, individual, or account level. For money-weighted returns, the report must account for the size and timing of the client's deposits and withdrawals.

The inclusion of this data is important for making sure investors can grasp what they’re paying, how much their investments cost relative to their worth, and if they are getting a good return. In the future, disclosure of this data will continue to expand under CRM3 to include other important findings around investment fund expenses, segregated funds, and more. This ongoing shift has caused challenges that advisors and firms can address with software and digital tools to stay ahead of regulatory curves.

Leveraging Software for Better CRM2 Compliance

Given that data is at the center of CRM2 compliance, the integration of advanced software solutions becomes vital for firms and advisors. When it comes time to enforce CRM3’s total cost reporting, this software will be essential for arranging costs laid out in previous initiatives with brand-new disclosures that will accommodate industry concerns.

At some legacy companies, data is fragmented across multiple systems, each designed for a specific purpose. For instance, one system may handle onboarding and store KYC data, another may manage portfolios and store investment return data, and another may calculate account fees. This disjointed approach complicates comprehensive reporting and data analysis. 

Software solutions are an important asset in managing this complex reporting. They enable firms to collect, analyze, and present data in a comprehensive and client-friendly manner. More specifically, they can assist with the greater need for data integrity, investor education, and efficient documentation that can be harder for legacy systems to accomplish.

Furthermore, using software that connects and unifies data into one platform has significant advantages. It can help firms increase efficiency and differentiate themselves from others in the market. Data aggregation can also lead to quicker and more informed decision-making by providing a comprehensive view of information and making it easier to interpret. It allows advisors to increase efficiency and make the process of presenting data for clients and CRM2 compliance much simpler. Adopting a platform that puts all the information investors will need to know ahead of new guidelines will keep firms and advisors from falling behind, and help provide better service to investors.

Alongside this, giving better access to information about fees, account performance, and more through configuration enables a more personalized experience. When data is aggregated and seamlessly accessible, advisors can use configurations to tailor their communications and services to the specific needs and preferences of each client, leading to higher engagement and retention. 

With platforms like OneVest, having all client data interconnected using comprehensive integration capabilities makes producing reports that comply with CRM2 requirements easier. Especially when firms want to incorporate new abilities into their current systems for managing CRM2, and advisors want to find data quickly. 

Additionally, with intuitive filters and pre-built dashboards, finding data to complete reports can be done with ease and lead to better strategic planning. The unified structure and configurability of OneVest’s reporting templates also mean firms can customize and tailor their reporting to the client. Doing so gives the client their own unique view of their insights and gives firms the ease of developing statements faster and more comprehensively.

CRM2 is reshaping the wealth management industry by prioritizing transparency; and with  CRM3 coming, fee and performance reporting need to be reimagined. Approaching it with the help of software solutions can give advisors and firms the opportunity to not only manage it, but turn it into an advantage for improving operations and enhancing client service going forward.

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