Have your clients received their new-look statements yet?

With the majority of investors having now received their new-look statements, many advisors will have clients who are struggling to understand what they see. Last week, the Ontario Securities Commission (OSC) launched a new website to help educate Canadian investors, but there’s little doubt that many investors will be looking for answers from their advisor.

Despite the efforts of most advisors to prepare their clients, some investors will get a surprise when they their open up their new statements. “Some investors may even have sticker shock,” says Susan Silma, a Partner at CRM2 Navigator. “There is low awareness of fees among clients and, even if advisors think they’ve explained fees, investors aren’t always remembering the details. In any event, those previous conversations about fees likely discussed percentages and not dollar terms.”

A recent JD power survey found that 75% of clients don’t understand the commissions and fees they pay. A similar piece of research conducted by Tangerine Investments found that 47% believe they don’t pay anything at all or are unsure of what they pay. All of the information points to a large amount of investors coming in for quite a shock.

Over the past few years, Silma and her team have spoken to hundreds of investors and thousands of advisors to get their views on the various CRM2 measures. They discovered a distinct group of investors who, rather than reach out with questions, expect initial contact to come from their advisor. When those investors don’t receive a call they’re likely to grow dissatisfied with the lack of contact and ultimately lose trust in their advisor. There is a strong possibility that these clients will start to look for an alternative investment provider. “It’s imperative that advisors be proactive and don’t shy away from having conversations with their clients,” Silma says. “They should take the lead in these conversations and steer them through the fee reports, not just wait for the client to ask questions.”

Silma urges advisors to avoid industry jargon and speak in terms that can be easily understood by a client. Even a term as straight forward as trailing commission is not well understood, so finding the suitable terminology should be a top priority for conscientious advisors. While conducting research on the impacts of CRM2, Silma also found that most clients aren’t interested in getting a detailed explanation of who pays what to whom; they’re more focused on their own personal outcomes.  “We always talk about being able to explain the value a client receives for the fees they pay, but clients don’t value things in the way we think they do,” Silma says. “It’s important to talk about what matters to the client, not just what we think matters to them.”

Silma says that investors will appreciate being educated on fees and performance and that advisors who approach these conversations in the right way will strengthen their client relationships. She also notes that investors don’t always remember all the things an advisor does on their behalf. “Clients don’t appreciate what you do behind the scenes, so think about how to explain all of the things you do when you’re not face-to-face or on the phone with them,” she says. “Work out ways to talk about the hidden or intangible value you provide in addition to the conversations and meetings you have.”


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