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CRM2: How Much Are you Paying In Investment Fees?

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On July 15, 2016, the CRM2 regulation or the Client Relationship Model - Version 2, which outlines the regulations to improve the disclosure of investment performance, charges and compensation to clients, became effective in full after a three-year phase-in period. Specifically, one of the CRM2 requirements that is now effective requires investment advisers to disclose all fees charged to clients directly or indirectly, including sales charges, trailing commissions, trading fees and other charges.

Up until now, most of these fees have been buried inside fund documents. As a result, many Canadian investors haven't been able to understand the impact of total costs on their investment portfolios, and how it has impacted their nest egg and reduced their take home amount in retirement.

We're taking a look at how these new regulations will benefit Canadian investors and the costs currently being incurred in their portfolios.

The Canadian investment landscape

Canada is the most expensive market among 25 nations for investing in mutual funds (source: Morningstar Report), and yet most Canadian investors have held these funds in their investment portfolios for years. An average equity mutual fund in Canada carries an MER of 2.35%. To put this into perspective, if you have an equity investment portfolio of $100,000 you are currently paying $2,350 in fees every year!

So have higher costs resulted in better outcomes for investors? Not really. A report commissioned by the OSC and produced by The Brondesbury Group concluded that: funds that pay commissions underperform; mutual fund costs raise expenses and lower returns; advisors push investors into riskier funds; and, investors can't easily assess what form of compensation is best for them. The SPIVA report produced by the S&P Global also indicates that a majority of active managers underperform their benchmarks over longer periods of time, a large amount of which can be attributed to high fees.

The mandatory fee disclosures will help investors understand how much they are paying and weigh it against the value of services they receive. Click here to see the sample statement that you should receive from your advisor annually.

As a Canadian investor, what should you do?

You check prices when you buy groceries, insurance, and plane tickets, so why wouldn't you check the prices on your investment products? Your investments are meant to provide you with a comfortable retirement, help you further your children's education, or allow you to reach another goal. Being in the dark about the costs on your investments could result in leaving a significant amount of money on the table and taking away from your goals. Take a look at the table below.


If your goal is to retire with at least a million dollars in your retirement savings, you could have an extra $350,000 to $600,000 in your portfolio from fee savings alone. This potentially means an additional $1,500 to $2,500 every month in retirement income! Ask about your investment fees and find a plan that works for you. You may not see the benefit right away, but you will certainly see it once you reach your goal.

What are your next steps?

1. Find out how much you are paying in fees. If you don't have an annual statement from your adviser, use the OSC calculator. Or, send us a copy of your recent statement to and we will provide you with a breakdown of your fees.

2. Seek alternatives. If you are a do-it-yourself investor, consider low cost options such as Exchange Traded Funds for your portfolio, which give you broad exposure to different areas of the market at a low cost. If you need advice, consider online advisers who offer convenient and low cost managed solutions. At Invisor, our clients incur an all in cost of 0.85 per cent on average per year for a fully managed service. That is a potential savings of 1.5 per cent every year in your portfolio versus traditional mutual funds.

3. When you assess online advisers, remember that the lowest fees do not always guarantee great results and a well-rounded client experience. Get a good understanding of the investment management process, how portfolios are constructed and managed, cost breakdowns, the capabilities of the investment team, and how you will be assisted after you open your account.

While the general perception about regulations is that they add friction to processes and increase costs, we think the new regulation on fee disclosure is a great step in reducing the costs of investing for Canadians. If you have any questions about the fees you're currently paying, or how much you could save with an online adviser, use our savings calculator or email us at

Josh Miszk is the Vice President of Investments at Invisor Investment Management Inc., one of Canada's leading online financial advisors that provides personalized investment management services. Josh's goal is to make it easier for young Canadians, like himself, to create a plan for their families and help them achieve their financial dreams sooner.

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