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Ensuring investors benefit from regulatory changes.

Even the most confident and independent of investors will admit to the benefits of working with an experienced financial advisor they trust.

After all, good advisors have specific, in-depth education, experience, and more time to dedicate to understanding the market than someone who’s working long hours in another field, has a family to feed, needs time to mark students exams …. you get the picture.

Another advantage to working with a registered financial advisor?

Anyone selling securities or offering investment advice in Canada must register with their local securities regulators. Registration protects investors because securities regulators will only register individuals and firms if they are properly qualified. You can also be sure that regulatory changes, designed to improve the industry, will be adhered to.

Industry-wide regulations improving financial reports

Here’s a recent example of the advantages of working with advisors registered with securities regulators. In order to provide investors with greater transparency about the cost and performance of their accounts as required by the new industry-wide regulation, Client Relationship Model II (CRM2), Educators will be sending investors two new reports in January.

What’s different about the new investment reports?

You’ll notice three major differences in these new reports:

1. More detail

These reports will provide the additional details about your account fees and performance required by the Ontario Securities Commission. They will follow guidelines provided by the Investment Funds Institute of Canada (IFIC), to:

  • provide an annual report on charges and other compensation that shows, in dollars, what the dealer or advisor was paid for the products and services it provided; and
  • provide an annual investment performance report that covers
    • deposits into, and withdrawals from, the client’s account;
    • the change in value of the account; and
    • the percentage returns for the previous year.*

2. Simplified language

In addition to new information, the reports will include simplified language and additional explanations of many of the financial terms used on financial statements.

3. How your rate of return is calculated

Previous to these new reports, a “time-weighted” rate of return calculation method was used in your Educators Quarterly Account Statements. This is changing to the “money-weighted” method required by the OSC and will provide consistency within the industry.

What’s the difference?

One method isn’t ‘better’ than the other. The time-weighted calculation method provides the rate of return of an investment without taking into account the size or timing of contributions and withdrawals, and is more appropriate for assessing fund manager performance.  On the other hand, the new money-weighted method does include the size and timing of contributions and withdrawals, as well as the investment performance of the funds.  With this method, periods in which more money is invested contribute more heavily to the overall return.

The specific style and wording of these reports will vary depending on your investment firm, but here’s what IFIC thinks they might look like:

  1. https://www.ific.ca/wp-content/uploads/2015/04/Model-Report-on-Investment-Performance.pdf/10331/
  2. https://www.ific.ca/wp-content/uploads/2015/04/Model-Report-on-Charges-and-Compensation.pdf/10338/

Anything that encourages conversation with your advisor is good.

Educators Financial Group is proud of the quality of investment advice we offer, which reflects the knowledge of our advisors, a dedication to understanding the unique needs of the education community, and the latest regulatory standards. The recent CRM2 regulations will make your investments easier for you to understand and make your conversations with your financial advisor even more valuable for you.  Please give us a call at 1.800.263.9541 at any time with your questions.

For more information on the value of advice, read our other articles in The Learning Centre.

  1. Protect your future with professional advice.

  2. Fund managers and advisors – more than meets the eye.

  3. How is your financial advisor paid?

 

*Return values are not available for three, five and ten years as they are calculated as of the conversion date to our current operating system (January 31, 2014) or the account hasn’t been opened for that period of time.

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