Editor’s note: Coverage of Morningstar’s Executive Forum in Vancouver on the implications of phase two of the Client Relationship Model — known as CRM2 — concludes with a discussion of how investors will respond to greater disclosure and transparency of fees. The executive panellists: Sandy Martin, senior vice-president and chief compliance officer with the full-service investment dealer Raymond James Ltd.; Tom Bradley, president of Steadyhand Investment Management Ltd., a direct-sales fund company; and Warren Funt, who manages operations in Western Canada for the Investment Industry Regulatory Organization of Canada (IIROC). Held on Oct. 29, the panel was moderated by Morningstar editor Rudy Luukko. Rudy Luukko Related news Low investor awareness of CRM2 a challenge for firms and advisors Investors more confident in mutual funds, discerning of fees Asset managers say increasing regulation top near-term challenge Facebook LinkedIn Twitter Share this article and your comments with peers on social media Keywords Client relationship model Luukko: There’s one school of thought that if you make fees much more transparent, people will get sticker shock and decide they’re going to leave their advisor and go do it all themselves or get a robo-advisor. Another school of thought is that since fees are going to be out in the open, an advisor can just deal with other issues of the relationship including the value that they’re providing. Are there going to be ramifications in terms of client desertion or anything along that line as a consequence of CRM2? Martin: What I really see happening is that we’re going to see migration of advisors from fee-based and transactional accounts. What that means is they will end up in portfolio managed accounts. Clients will know what the fees are upfront. What we’re likely to see is a lot of smaller clients not being in a position to be able to afford or be able to have the capital to invest in portfolio managed accounts. Bradley: I think we all in this room hope there’s going to be one million to two million Canadians who are free agents to come out of this, and we can all compete for them. Maybe I’m being optimistic, but I think this is going to allow clients to move to where they should be. There are lots of full-service brokerage clients that shouldn’t be full-service brokerage clients. They’re not getting much service. They don’t have the needs that would demand the attention of a broker and so they should be with a discount broker, they should be with a robo-advisor, they should be at a bank branch or they should be at Steadyhand or Leith Wheeler or somewhere like that. It’s an inevitable consequence of (CRM2) that we’re going to get some movement. Funt: I wouldn’t call it an unintended or an intended consequence. Clients will move to where they want to move to because they understand the price they are paying. Luukko: Is disclosure enough? Bradley: I think we should go all the way and get rid of trailer fees. I do feel very strongly that CRM2 will certainly raise the awareness that there are trailers out there. But I think if we really want to change and finish this shift that we’re going through — a seismic shift — I’d love to see them go. I don’t want the marketing department at a fund company deciding how the payment or the compensation is going to be between the client and the advisor. I would much rather see that decided between the client and the advisor. Martin: CRM2 will determine whether clients receive any value from disclosure. I can tell you, time and again we run into clients that don’t even open statements. They want to go to (advisors) with their statements because then they don’t have to look at them. I do kind of wonder whether or not this particular effort (CRM2) will actually have any impact on a good percentage of the clients that are investing. They don’t have a lot of time to look at the stuff and there is a lot of disclosure. Bradley: I agree with Sandy, but if there is any place we are going to get through to clients and get them to look at something it’s on their statement. When I talk about closing the feedback loop, that’s why I think it’s so important that cost and performance are there. But I agree a lot of people aren’t going to see that or read it or understand it. Funt: We are giving them the choice. If you give them that information, particularly when it comes to price information as to what they are paying for a service, they need to open it. If they care enough to open it, that’s great. Bradley: I think we should all care. I would think that the regulators, in coming up with policy and things that we all have to follow in this room, would be doing things that are more inclined to work than not work. Funt: The point is, it’s the investors’ choice. So, if I choose not to open my Visa statement, it’s the same kind of thing. I should and I do. So should the (investment) client, but we can’t make them open the statement. This concludes coverage of the CRM2 Executive Forum. Click here for Part 1.
Ivan Hernandez & Bobby Steggert (seated center) with the cast of the 2010 musical “Yank!”(Photo by Carol Rosegg) Here’s a quick roundup of stories you might have missed today. Bobby Steggert, Ivan Hernandez & Yank! Stars to Celebrate 10th Anniversary in ConcertStars of the 2010 musical Yank! will reunite in concert next year for a one-night reunion. The event will be held at Feinstein’s/54 Below on February 24, 2020, exactly 10 years to opening night of the off-Broadway production at York Theatre Company. Cast members set to participate in 7:00pm reunion concert include Tony nominee Bobby Steggert, Ivan Hernandez, Nancy Anderson, Jeffry Denman, Tally Sessions and Andrew Durand, with commentary by the show’s creators, brothers Joseph Zellnik (music) and David Zellnik (book and lyrics). They will be joined by guest artists who have played leading roles in Yank! productions around the world: Scott Hunter, Andy Coxon, Sarah-Louise Young, Hugo Bonemer, Conrado Helt and Naomi Price. Yank!, a love story between two men in World War II, is based on the hidden histories of gay men and women who served in the armed forces.LaChanze & More Sing the Music of Carmel Dean in ConcertA multi-talented group of performers will come together for one night next month to perform Well-Behaved Women, a song cycle featuring the music of Carmel Dean. Schele Williams will direct the concert event, to be held at Joe’s Pub on January 25 at 7:00pm. The song cycle centers on the powerful stories of groundbreaking women including Ruth Bader Ginsburg, Harriet Tubman, Frida Kahlo, Billie Jean King and Malala Yousafzai told through original songs, celebrating the ways in which their bad-ass behavior helped them make history. Performers slated to sing out include LaChanze, Liz Callaway, Bonnie Milligan, Barbara Walsh, Katie Thompson, Natascia Diaz, Kuhoo Verma and Melissa Rose Hirsh.Arena Stage Announces World Premiere Musical Based on the Life of Frederick DouglassWashington, D.C.’s Arena Stage has scheduled the world premiere production of American Prophet, a new musical chronicling the life and legacy of human rights leader Frederick Douglass. Directed and co-written by Charles Randolph-Wright and featuring new music by Grammy winner Marcus Hummon, the musical will run from July 10 through August 16, 2020 in the Kreeger Theater. “Frederick Douglass always has been the ultimate hero to me, and American Prophet is one of the most inspiring projects I have ever done at Arena,” shared Randolph-Wright. “What a perfect place and a perfect time to tell this extraordinary and necessary story. How did this escaped slave become one of the most important people of the 19th century—of any century? The answer is in Douglass’ own words, and Marcus Hummon and I are proud and humbled to help bring these transcendent words to the stage.” Casting will be announced soon.Freestyle Love Supreme Academy Accepting Applications for January ClassesNow’s your chance to learn freestyle rap and hip-hop from the best. Applications are now being accepted for Freestyle Love Supreme Academy, a group of classes taught by members of the high-energy Freestyle Love Supreme, currently receiving a hit Broadway-premiere run. The popular improv company, which has been playing to sold-out audiences since 2003 and is now at the Booth Theatre, has transformed its unique blend of improvisation, storytelling and hip-hop into hands-on classes, which include several Foundations of Freestyle classes. Topics will include beatboxing, improv skills, word flow and speaking truthfully through music. For more information on the Freestyle Love Academy, click here.P.S. The six weeks of Red Bucket fundraising earned a remarkable $5,631,888 for Broadway Cares/Equity Fights AIDS. LaChanze Bonnie Milligan Star Files View Comments Ivan Hernandez Bobby Steggert View All (4)