CRM2: Delivering Value in the Nexus Fee Structure

Topic: CRM2

James E. Houston CIM, FCSI

November 16, 2016


Print & Share

Print

CRM2: Delivering Value in the Nexus Fee Structure

This article is the second in our series addressing the implementation of CRM2 regulations by investment dealers and investment managers, and will address how fees will be disclosed under the new rules. The complete series can be found in our Special Edition of Nexus Notes.

A number of years ago, we wrote a Nexus Notes article entitled “Where’s The Beef?” (it was later republished as a blog, which you can read here). The purpose of the article was to educate readers regarding the fees that they should expect to pay for a meaningfully sized investment portfolio, and to outline the advantages that come from working with a discretionary portfolio management firm. Analysis of industry pricing, as described in the “Fee Tree” schematic published with the article, suggested that individuals with portfolios in excess of $1 million could expect to pay investment management fees of 1.0% to 1.5% for the full services offered by a firm such as Nexus. This is considerably less than many investment alternatives.

To protect investors from being unknowingly subjected to unreasonably high fees, the Ontario Securities Commission and other regulatory bodies across the country felt that it was in investors’ best interests that the fees they pay to have their investments managed be disclosed in a consistent and thorough manner. CRM2 regulations dictate that the absolute dollar amount of fees paid to advisors, whether they are independent portfolio management firms or financial advisors with bank-owned dealers, be disclosed annually beginning in January 2017.

Nexus has always been transparent about the fees our clients pay. Because we deal directly with our clients, there are no hidden commissions or trailer fees paid to third parties. We believe that the fees we charge for the service we provide represent good value for our clients, and we welcome the industry wide disclosure as it will equip investors with a standard measure to assess if they are “getting their money’s worth”.

Unlike many investment solutions where fee rates don’t change based on account size or product makeup, Nexus passes along these efficiencies to our clients. The investment management fee (a percent of your assets at Nexus) will be lower as the value of your investments grows, as more of your capital is managed in our pooled funds, and the greater your holdings are in the Nexus Income Fund. Moreover, financial counselling is available at no extra cost1. At Nexus, a balanced combination2 of our Equity and Income pooled funds for a $1 million portfolio would generate investment management fees of approximately 1%. Because of our tapered fee schedule, the average fee would drop to 0.93% for a similarly constituted portfolio of $2 million and to 0.79% for a $5 million portfolio.

Beginning in January 2017, in addition to the reporting information our clients already receive, we will provide a supplemental report which will show investment management fees paid per account in accordance with CRM2 regulations.

As more sunlight is brought to bear on the range of investment options available in the market, we are confident clients will be reassured that they are getting great value for their relationship with Nexus.

Looking for further reading on our CRM2 blogs? Click here to visit our CRM2: Cutting Through the Complexity series. You can also read the full series in our Special Edition of Nexus Notes here.

1 For clients with Nexus portfolios less than $1 million, the full financial counselling service is available on a fee-for-service basis.
2 Nexus North American Equity and Income funds held in combination with a total equity weight of 65% (as of Oct. 31/16).

More Like This...

See another CRM2 blog post that may be of interest to you.

CRM2: The Nexus Approach to our CRM2 Reports

Topic:
CRM2
Excerpt:
With changing securities regulations coming into effect, investment firms are now required to provide individual investors with specific additional in

More Like This...

See another Foundations & Endowments blog post that may be of interest to you.

Charitable Giving Made Easier

Topic:
Foundations & Endowments
Excerpt:
Giving to charities and supporting our community are important to us at Nexus. We donate a portion of our management fees back to the charities and

More Like This...

See another Human Interest blog post that may be of interest to you.

The Case for Openness – An Open and Shut Case?

Topic:
Human Interest
Excerpt:
From time immemorial, mankind has been open. Open to new ideas, open to trade, and open to migration – the three critical ingredients for progress.

More Like This...

See another Inside Nexus blog post that may be of interest to you.

Au Revoir

Topic:
Inside Nexus
Excerpt:
As you may be aware, my time at Nexus is coming to a close. Over the last number of months, I have been working closely with others at the firm to

More Like This...

See another Investments blog post that may be of interest to you.

Say “No” to Absolute Safety

Topic:
Investments
Excerpt:
My colleague Harsh Narsinghani and I were recently discussing how many of our clients were unnerved by geopolitical and economic worries and how it

More Like This...

See another Pearls of Wisdom blog post that may be of interest to you.

“Work, Work, Work, Work, Work, Work”

Topic:
Pearls of Wisdom
Excerpt:
This has been a busy year. I’ve had lots happening on the home front (a wedding!) and lots going on at the office (too long to list!) Managing work

More Like This...

See another Tax Planning blog post that may be of interest to you.

Capital Gains, Charitable Acts, and the New Alternative Minimum Tax

Topic:
Tax Planning
Excerpt:
If you regularly make charitable donations or perhaps sit on the board of a charitable organization, you might be wondering what all the hubbub

More Like This...

See another Wealth Planning blog post that may be of interest to you.

The Case for An Annual Family Roundtable

Topic:
Wealth Planning
Excerpt:
Not long after I joined Nexus, Bill Berghuis imparted some good advice that has stuck with me

On a Side Note…

See another CRM2 Nexus Notes Quarterly article that may be of interest to you.

No posts found.

On a Side Note…

See another Foundations & Endowments Nexus Notes Quarterly article that may be of interest to you.

Charitable Giving Made Easier

Topic:
Foundations & Endowments
Excerpt:
Giving to charities and supporting our community are important to us at Nexus. We donate a portion of our management fees back to the charities and

On a Side Note…

See another Human Interest Nexus Notes Quarterly article that may be of interest to you.

Worth 1,000 Words

Topic:
Human Interest
Excerpt:
A little humour makes the world a better place.

On a Side Note…

See another Inside Nexus Nexus Notes Quarterly article that may be of interest to you.

Where Have All the Boutiques Gone?

Topic:
Inside Nexus
Excerpt:
Many small, once independently managed, firms have fallen into the clutches of larger organizations such as banks, institutional money managers and

On a Side Note…

See another Investments Nexus Notes Quarterly article that may be of interest to you.

From Vineyards to Portfolios: Cultivating Long-Term Wealth

Topic:
Investments
Excerpt:
My wife and I have been stymied so far this summer in getting to the Niagara region for our annual weekend of cycling through the vineyards and

On a Side Note…

See another Pearls of Wisdom Nexus Notes Quarterly article that may be of interest to you.

Pearls of Wisdom

Topic:
Pearls of Wisdom
Excerpt:
Reading is one of the principal occupations in our profession. As we digest a wide range of material, interesting ideas and surprising facts – some

On a Side Note…

See another Tax Planning Nexus Notes Quarterly article that may be of interest to you.

Capital Gains, Charitable Acts, and the New Alternative Minimum Tax

Topic:
Tax Planning
Excerpt:
If you regularly make charitable donations or perhaps sit on the board of a charitable organization, you might be wondering what all the hubbub

On a Side Note…

See another Wealth Planning Nexus Notes Quarterly article that may be of interest to you.

From The Editor: No Time Like the Present

Topic:
Wealth Planning
Excerpt:
I recently heard one of my favourite quotes about planning. It can come in various versions, but to paraphrase, ‘The best time to start planning was