Can transparency attract investors to you?

Can transparency attract investors to you?

BY John Easton, Director of Wealth Management
July 20, 2016


Under Phase 3 of CRM2 requirements, clear disclosure of fees and performance are mandatory. But transparency positioning can also help financial advisors attract and retain clients. Can you ramp up your communications practices to be more attractive to investors?

In CRM2 and You: Part 1, we recapped the requirements of the Canadian Securities Administrators’ Client Relationship Model, Phase 2 [CRM2] regulations, with a focus on preparing your systems and processes for the Phase 3 requirements, in effect as of July 15, 2016. Equally important is communicating with clients, and that’s the focus of this blog post.

Embrace transparency

Many advisors are concerned that investors will be confused by the new reporting methods, or question the value of professional advice once they see fee and performance information laid out clearly.

The way to prosper in the era of CRM2 is to embrace, rather than evade, the spirit of the regulations. Take the data collected and communicate it with complete transparency in all written and verbal communications.

Be proactive

Paul Strijckers, VP, Business Solutions at Broadridge, recommends looking for ways to get the client involved before you issue your newly designed reports.

“Most reasonable people understand that they can’t expect someone to work for free,” he says. “Explain what you do for the client, the fees you earn, and the value you are creating — before reports are released.” This requires knowing your value proposition and the unique approach and services you bring, he says.

By having this conversation ahead of time, you’ll also establish the groundwork for a more in-depth and nuanced discussion later.

Develop scripts

“Anticipate your clients’ questions and objections and prepare standardized responses in advance of any meetings or conversations,” recommends Strijckers.

You’ll be more relaxed discussing sensitive topics such as fees if you’ve rehearsed your phrasing. The confidence you will project with calm and honest explanations should help allay most client concerns.

Evolve the conversation by learning from your earliest interactions. Note which concepts were most confusing as well as any unanticipated questions that arise, and refine your scripts accordingly.

Craft your story

Once the reports are out, there will be a renewed focus on performance, which may bring surprises to some clients. This will be particularly true if you have presented a time weighted measurement in the past and will now be showing only the dollar weighted return.

Consider how you will craft your story to set expectations. For example, your conversation might address questions such as:

  • What is an appropriate benchmark for this account?
  • How did the benchmark perform?
  • What happened in the client’s account that influenced returns?
  • Did money come into or leave the account, and how did the timing affect rate of return?

Be ready for anything

You will need to arm yourself with a combination of prepared, stock answers to common questions, plus knowledge of the particulars of each client’s portfolio so that you can speak to their specific results.

“A carefully structured client dashboard really helps by putting essential client account information at your fingertips at all times,” says Strijckers.

To find out how to turn the CRM2 requirements to your advantage, watch our on-demand webinar today. 

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