by Tom Bradley

Last January/February, many Canadian investors got a first peek at what they’re paying their dealer or investment manager, and what their returns have been. I say peek because for the most part, dealers did the minimum to meet the new reporting requirements (often referred to as CRM2). They showed only the cost of service and advice, leaving out the management fees charged by any ETFs, pooled funds or structured products in the portfolio. And most firms only looked at returns going back one year.

Well, it’s reporting season again and it’s time for another peek. This year it may be slightly more enlightening. I don’t say that because your Annual Fee and Performance Reports will be vastly improved, although we can always hope. I don’t say that because dealers will have filled in the gaps on fees. Again, we can hope, but that’s not likely either. I say that because they’ll be showing you returns for two years, not just one.

OK, I’m being somewhat facetious. Two years is still a very short period and you should never base a decision on that little data. And besides, the reports I’ve seen so far use a format of 1,3,5 and 10 years, so 2 years doesn’t even show up. Nonetheless, as each year passes and mandatory reporting gets longer, you’ll start to get a better sense of how you’re doing.

But you don’t have to wait. I’d suggest using the current Annual Report as a tool to have a more informative discussion with your provider. An ice breaker if you will.

  • With report in hand, I’d ask your provider to fill in the blanks. If you’ve been with the firm for many years, ask for your longer-term returns. Most dealers can access them with the push of a button.
  • If you get a more complete set of numbers, ask your advisor to provide some context. In other words, what were the relevant market returns over the same periods.
  • As for fees, I don’t think it’s too much to ask for an accounting of what the fund management fees add up to. For portfolios that mostly own individual securities, the number will be low. For those built around ETFs and funds, the product fees (MERs) could account for up to half of your total cost of investing.

We meet many investors who are reluctant to ask their advisors these questions. The Annual Report is an easy way to get over that hump. Tell your advisor you’d like to understand it better. There’s nothing to lose. And if he/she can’t answer your questions or tells you to ignore the report, then you’ve gained more valuable information than any number on a page. You’ve discovered it’s time to change your advisor.

Note: Steadyhand doesn’t provide an annual report. Our investors get a full reporting of fees and returns every quarter on their client statement.