CRM3’s winners and losers

The Client Relationship Model Phase 3 (CRM3) introduces comprehensive cost-transparency requirements that will reshape how investment firms, advisors and investors interact and make decisions.

Dealers began collecting data Jan. 1 on all embedded costs in funds sold to clients. Beginning in early 2027, they must deliver more detailed reports that include both dollar amounts and percentages. Total cost reporting has arrived.

CRM3 builds on CRM2, which focused primarily on disclosing advisor compensation and direct dealer fees. While CRM2 improved transparency, embedded fund expenses — such as management expense ratios and trading expense ratios — remained largely opaque to investors.

CRM3 addresses that gap by mandating disclosure of all direct and indirect costs associated with investment funds, including mutual funds, segregated funds and ETFs.

Our research shows that Canadian investors — especially younger ones — are increasingly engaged in their finances. The industry is in catch-up mode and often struggles to communicate the finer points of security selection, portfolio management and broader financial planning.

Regulators’ objective is straightforward: investors should understand what it costs to invest.

A call to action

CRM3 will be a catalyst for change, particularly if investors are willing to learn, engage and take greater control of their finances. Advisors and firms should proactively contact clients to explain what they will see in their statements beginning next year.

Five implications:

	Investors	Firms	Advisors
Statements/reporting	Greater awareness of the amount and types of fees paid for financial advice.	Increased scrutiny from investors on the value delivered. Higher costs to support new disclosure requirements.	Greater need to articulate both tangible value (portfolio management, financial planning) and intangible value (emotional support, behavioural coaching).
Advice platforms	More focus on the cost-value tradeoff in financial planning and advice. Increased demand for self-directed investments.	Need to differentiate the client experience through personalization, operational efficiency and proactive service. Stronger advisor support through research and client-facing insights.	Greater need to clearly define and communicate their value proposition.
Investment products	Increased demand for lower-cost investments, such as ETFs. More scrutiny of fund-of-fund structures that raise total costs.	Pressure to launch lower-cost investment options. Heightened scrutiny of insurance-based products, such as segregated funds.	Need to ensure access to lower-cost solutions and manage overall portfolio costs.
Profit margins	Greater focus on establishing a fee budget to manage total investment costs.	Pressure to reduce fees as clients focus on total cost. Shift toward fee-based accounts to improve cost transparency.	Potential pressure to reduce advisory fees.
Access to financial advice	More likely to seek advisors who support greater control and transparency. Increased willingness to question the value of advice received.	Need to invest in self-service capabilities.	Greater demand for broadly licensed advisors with access to diverse product solutions. Need to increase the demonstrable value of advice delivered.

Winners and losers

CRM3 will intensify the focus on cost, client experience and product access. It will accelerate trends already underway.

More investors are partially self-managing portfolios. The hybrid investor expects education and support, not just product recommendations.

Clients will also expect greater personalization, particularly younger investors early in their financial planning journey.

Three big takeaways:

1. Client retention will become more difficult. Advisors who proactively explain reporting changes and reinforce their broader value proposition will retain clients. Reactive, transactional advisors will struggle.
2. Demand for lower-cost products will rise. ETF providers and self-directed platforms stand to benefit. Mutual fund-only advisors and higher-cost product manufacturers may face pressure to reduce fees or risk losing assets.
3. The value of advice will be scrutinized. Advisors who deliver clear, differentiated value — and who manage costs thoughtfully — will succeed. Firms that invest in segmentation, personalization and predictive analytics will gain an advantage. Those that ignore cost pressure risk losing relevance.

CRM3 must be managed proactively by both advisors and firms. Investors want greater understanding and greater control.

If you are not planning to educate clients and adjust portfolios where necessary in response to total cost reporting, you are putting your business at risk.

For those supporting self-directed investors, this may represent an opportunity to attract clients who feel underserved or unconvinced of the value of traditional advice.