Financial advisors and clients can use new fee statements to build trust and have forward-looking discussions about risks, returns and behaviours such as saving more and spending less.natasaadzic/iStockPhoto / Getty Images
For many people, there’s a certain enjoyment that comes from completing minor repairs or home improvement tasks without hiring a professional.
The “do-it-yourself” (DIY) trend accelerated during the COVID-19 pandemic. With simple jobs, for which less-than-perfect results are acceptable, DIY projects can be enjoyable hobbies. However, sometimes overconfidence becomes evident when the initial thought of “I can do this” turns into the realization, “I should have called a professional.”
The stakes are higher when it comes to financial decisions. They’re often risky, complex and have significant long-term consequences. The outcome matters. Money is a significant cause of stress, and research shows financial well-being is a more important determinant of overall well-being than the combined effects of job satisfaction, relationship satisfaction and physical health.
Abundant evidence demonstrates that professional financial advice corrects for inexperience and incorrect beliefs, provides specialized knowledge, reduces effort and enhances decision quality.
Russell Investments’ 2025 Value of an Advisor study quantifies the benefits: increased returns thanks to active rebalancing, combined with behavioural coaching, customized planning and tax-smart investing can add as much as 4.87 per cent annually. Such improvements have a profound impact on individuals’ well-being.
Despite the potential advantages of having an advisor, an increasing proportion of investors are opening self-directed order-execution only (OEO) accounts and forgoing professional advice. Some investors possess the necessary experience, specialized knowledge, and discipline to avoid common investing mistakes such as neglecting risk, overtrading and overreacting to market volatility. For others, there’s evidence of overconfidence.
Another factor fuelling the growth in OEO accounts is the lack of trust in financial institutions and professional financial advisors. A 2024 report from FAIR Canada shows that a majority of OEO investors believe advisors put their own interests over those of their clients. This mistrust is due, in part, to a perceived lack of transparency around fees, commissions and advisor compensation.
Recent regulatory changes in Canada aim to address these concerns. In 2016, the second phase of the client relationship model (a.k.a. CRM2) mandated the disclosure of what clients pay for in trading commissions, administration and advice charges, and mutual fund trailer fees in client account statements. However, embedded product costs on exchange-traded funds, mutual funds and other funds were not included.
These embedded costs were disclosed in other regulatory filings but not on statements. For example, if the gross return of a fund was 12 per cent, and 2 per cent was deducted by the fund manager and paid to the client’s financial institution and financial advisor, the client’s account statement would only show the net return of 10 per cent. This lack of transparency left people knowing they were paying more but not quite sure how much and who was benefiting.
After more than a decade of work on CRM2, total cost reporting (TCR), otherwise known as CRM3, will apply to client statements as of January, 2027. Embedded product costs will now be disclosed on statements. This change will make it easier to compare investment performance across products and accounts and will eliminate hidden fees, thereby helping to restore trust.
The effort in operations and information technology required to collect all the information from all the companies managing the various investments and to report them on a single statement cannot be overstated. As well, it’s necessary to present the information in a way that’s comprehensible and encourages optimal decisions and behaviours.
People are not perfectly rational, utility-maximizing decision-makers who incorporate all available information to decide and act dispassionately. We are influenced by cognitive limitations, several biases and decision-making shortcuts that often result in behaviours that are not in our own best interest.
While more information may seem beneficial, information overload can impair decision-making and subsequent action. Recognizing all of that, securities industry regulators conducted extensive behavioural science research to design TCR statements that are understandable and support more optimal decisions and actions.
With the introduction of TCR, financial advisors have an opportunity to rebuild trust. Client account statements should not simply be a matter of regulatory compliance and enhanced disclosure.
Ideally, financial advisors and clients will use the new statements to build trust and have forward-looking discussions about risks, returns and behaviours such as saving more and spending less. Such discussions are more likely to promote better financial outcomes and improve overall well-being.
Dr. David Lewis is a behavioural economics consultant and a director on the Ontario Securities Commission’s board of directors. The views being expressed are his own and do not necessarily represent the views of the commission.