CRM2: Delivering Value in the Nexus Fee Structure

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James E. Houston, CIM, FCSI

November 16, 2016


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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).

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