Submissions to Government

PMAC Comment Letter to CSA-CCIR Total Cost Reporting Joint Consultation

Key Recommendations

  1. Provide investors with total cost information. We believe that investors want to know three key pieces of information: (1) what their investments are worth today; (2) how much their value increased (or decreased) over time; and (3) how much it cost them to get from A to B. In simple terms, it is about performance versus cost. The easiest way to express the costs is to combine all costs and fees and present them as a percentage of the client’s assets. We strongly support reporting all costs of investing as a simple percentage. The Client Focused Reforms include a requirement to consider product costs when selecting products to offer to clients. The importance of communicating about investment costs to clients should continue to be emphasized, and advisers and dealing representatives should receive training on product and total costs, including how to take them into account when making investment decisions and recommending products to clients.
  2. Consult with independent behavioural science experts to test any reporting templates prior to moving forward. Investor disclosure should highlight key information: value of investments; performance over time; and cost of investing – preferably on the first page. Additional details can be included in subsequent pages, or on a website. The CSA should determine the minimum information to be included in client disclosure, and suggest a presentation template based on behavioural research. The presentation of the information will be critical to the success of Total Cost Reporting (TCR).
  3. Provide investors with information that is consistent and comparable to allow them to evaluate investment advice and services. There is a gap in the current reporting that needs to be filled to enable a proper comparison between dealers and advisers, and between and among funds and other products. In order for transparency about costs to encourage competition, investors must be able to compare the costs of the products and services they receive so that the comparisons are valid. It is key that the total costs for advice and services be expressed as a percentage, and that the presentation of the information be understandable. Dollars will fluctuate from month to month, year to year, and account to account. Additionally, the dollar amount of costs will be higher as the account value increases. The only constant is the percentage of client assets paid in fees and costs for the products and services received. PMAC believes that including the total costs for advice and services as a percentage, in a format that is understandable to investors, will encourage competition.
  4. Exclude certain non-individual institutional clients from the proposal. Certain non-individual institutional clients that do not qualify as permitted clients should be excluded from TCR. These clients have unique reporting requirements that are different from retail investors and this reporting may or may not include TCR. We believe that an exemption is warranted for these types of sophisticated investors, which can negotiate their own terms, and that providing an exemption would balance the regulatory burden in a way that is consistent with the CSA’s policy rationale for implementing TCR.
  5. Revise the implementation plan following consultation with stakeholders. We believe that TCR should be implemented as soon as possible but acknowledge that significant technological and systems changes are necessary. We do not believe these can be achieved within the timeframe proposed in the Consultation. These changes will require an investment of money and time for registrants and service providers. As described below, we believe that some aspects of the proposals could be simplified to facilitate a faster transition. We believe that it would be advisable to strike an industry working group with representatives from various issuers, dealers, advisers, and service providers to provide additional feedback before the amendments are finalized and to assist with the implementation process.

Click here to view the full submission.