Understanding TCR and the value of advice

Canadians have access to a broad array of investment products, and fees are an inherent part of the equation. These fees, charged by investment firms, help cover the costs related to account administration, investment product management, and transactions carried out on your behalf.

Under new rules that will begin phasing in next year, clients will see a more expansive picture of the fees they pay for investment services. We believe this is a good thing, as the disclosure of fees and performance is an important aspect of the advisor/client relationship. It also starts a conversation on the value of financial advice, and we embrace this discussion fully.

What is TCR?

Also known as the Client Relationship Model, Phase 3 (CRM3), total cost reporting (TCR) is the latest in a series of initiatives by Canadian securities regulators aimed at improving how financial information is disclosed to investors. The previous enhancement, CRM2, was implemented in 2017 and focused on disclosing performance and fees paid to investment advisors. CRM3 expands on this, adding new transparency requirements for costs paid by clients but embedded in the funds themselves.   

Under the new rules, the annual report on charges and other compensation will include a breakdown of total ongoing costs investors paid for mutual funds, exchange-traded funds (ETFs), and some other financial products. This includes fund management fees that have traditionally been embedded in the total cost of the fund, rather than separated out.

Investment costs will also have to be disclosed in dollar value, not just as a percentage of the total investment. This information in dollars will represent the aggregate amount paid for by all the funds held in the client’s account. 

Among the changes, client statements will have to show in dollar terms: 

• The amount of expenses for all investment funds, including management fees, trading costs, and operating expenses
• The amount the advisor was compensated for providing advice and service
• A total that reflects the overall investment costs for the year

Statements will also reveal the fund expense ratio, a figure that combines the management expense ratio with the trading expense ratio to provide a more fulsome picture of fund costs.

To be clear, these disclosures aren’t additional charges; they’ve always been part of the cost of the investments. They’ll simply be presented differently, which should provide a better understanding of the investment experience. This information is also generally found in the fund facts or ETF facts that are reviewed with clients. 

When does TCR come into effect?

TCR requirements will begin applying to funds in 2026, which means the information will begin to show up on annual statements received by investors in 2027.

While this is still a ways off, we believe it’s important to begin discussing these changes with clients well ahead of time and that these new disclosures are a great opportunity to help investors get a better sense of what they’re paying for and why good investment advice has real value.

What do these fees pay for?

Depending on the investment products and Manulife services used, clients may see varying costs on their annual statements; however, it's important that clients understand what the fees cover in terms of advice and investment products. 

This includes a broad spectrum of advice, covering wealth management and investment services, as well as investment research and costs associated with managing investments and various administrative services. 

It also pays for our extensive risk management expertise, both through expert advice and through financial products geared to protect our clients’ well-being against unforeseen events.

Embedded in our services is Manulife’s global reach, financial stability, and innovative technology and digital tools to make it easier for clients to manage their finances and access services.

Why are some funds more expensive than others?

Generally, fund costs are higher for funds (e.g., mutual funds) that are actively managed than for ETFs, which are designed to mirror an investment index. While the low costs of certain funds may be attractive, actively managed funds benefit from the expertise of the fund managers who use detailed research and analysis to try to best position their funds for the evolving market. Either option can be part of a sound investment strategy if carefully selected and appropriate for a client’s risk profile.

What does this mean for investors?

The changes to client annual reports on cost and other compensation won’t occur until 2027 and, it bears repeating, they don’t constitute additional or increased charges. 

That said, it’s always a good time for investors to talk to their advisors about the services they’re receiving, and we encourage these discussions.

Manulife strives to ensure clients get full value for their dollar, with better advice to help clients protect and grow their wealth with holistic, adaptable plans that fit their financial goals. We’re confident and proud of the value of that advice and the personnel and technology that back it.