Under CRM2, more BC millennials understand fees — and leave advisors or firms

New research from the provincial securities regulator provides an update on the impact of CRM2 fee reports

By Leo Almazora

Oct 04, 2018

The BC Securities Commission (BCSC) has released the latest results from a four-part, longitudinal study it commissioned to determine the impact of CRM2.

Based on the latest results, millennials in BC were more able to understand their investment fees because of the charges and compensation reports required under CRM2. Over the 16-month study period, young BC investors between the ages of 18 and 34 were more likely than older generations to recall both their 2017 and 2018 fee reports (62% of young people vs. 53% of those 35 and older).

Generally the same percentage of male (76%) and female millennials (74%) agreed that the CRM2 fee disclosure reports gave them the information they needed to better understand the fees they pay for their investments. Male millennials were far ahead of other groups (60% vs. 31% overall) to say they discussed their 2018 CRM2 reports with their investment advisor.

The study also saw a sustained improvement in general understanding of fees among 55% of respondents overall; in contrast, 49% of millennials saw such a sustained improvement. Millennials started out as the most likely age group to agree they know how much they’ve paid in direct fees in the last 12 months (66%, vs. 44% for those aged 35-54, and 49% among older investors); that self-reported degree of knowledge slipped 11 points among millennials, but rose by between 12 and 15 points among older age groups.

The survey also looked into new changes investors made in terms of how they invest and how often they spoke with their advisors after receiving the CRM2 reports. The likelihood of taking new actions didn’t differ significantly across age groups (63% for investors aged 18-34, 68% for 35-54, and 66% for 55+). However, when they did act, millennial investors were more likely than other age groups to switch advisors or firms (28%, compared to 20% and 7%).

“Millennials, like all investors, have choices when it comes to their investments,” said Pamela McDonald, director of Communications at the BCSC. “This longitudinal study shows that they are using their CRM2 reports to inform those choices.”

Other key findings:

The ability to recall receiving both CRM2 reports from 2017 and 2018 increased with portfolio size.
More confident/knowledgeable investors were more likely to recall receiving both reports (65%) compared to less confident/knowledgeable investors (45%)
Most groups saw small declines in trust with advisor, as well as net satisfaction with value for relationship and communication with advisor, value for fees, and performance.
Respondents with smaller portfolios reported better general and specific fee knowledge in greater numbers than those with larger portfolios, but they were by far the least likely to have taken any action
45% of those with lower market competence took no action despite being more likely to see a long-term increase in their general and specific fee knowledge