# CRM2 and new statements from discount brokerage?



## Beaver101 (Nov 14, 2011)

How do you like the new statements from your discount brokerage that was mandated as phase 2 of CRM practice?


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## pwm (Jan 19, 2012)

Dec 2016 statements at TDDI & Qtrade look exactly like they always did. I can't see any evidence of CRM2


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## AltaRed (Jun 8, 2009)

Different brokerages handle things differently it appears. BMO IL says their December statements will be issued 3rd week of January (this week) with the new reporting stuff included. Scotia iTrade issued their December statement first week in January as normal but said that the additional reporting requirements would be issued circa Jan 17th. This week should see a flurry of activity.

That said, both websites already show quite a bit of performance reporting, including annual and cumulative returns going back to 2013, charting capability with indices, portfolio growth, etc. Just don't how complete it is, nor are costs posted. Curious about seeing what these 2 companies report.


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## GreatLaker (Mar 23, 2014)

pwm said:


> Dec 2016 statements at TDDI & Qtrade look exactly like they always did. I can't see any evidence of CRM2


Same here at TDDI. Preet Banerjee was on Global's Morning Show this AM discussing the new reports. He said the new reports should be out within 2 weeks, one for each account. I got the impression they would be new reports that are separate from the standard monthly statements. 

From the OSC. http://www.osc.gov.on.ca/en/Dealers_crm2-faq-planning-tips.htm



> Beginning July 15, 2016, registered firms will need to:
> 
> 
> provide an annual report on charges and other compensation that shows, in dollars, what the dealer or adviser was paid for the products and services it provided; and
> ...


Sounds like issuing reports once per year would suffice.

Everyone responding to this thread should indicate what broker and the date they received the reports.


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## Beaver101 (Nov 14, 2011)

^ Received these 2 reports today (finally) from CIBC IE and performance reporting is just for 1 year - the previous 2016 ... and now "monthly" statements will reduced to "quarterly" if there's no transaction to report ... dividends, interest and cash disbursments do not count as transactions.


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## Bill G (Jan 8, 2017)

Received e-notification from National Bank Discount Brokerage that these were available on January 12.

Despite being a long-time customer, only 1 year returns were provided. Time-Weighted and Money Weighted returns were shown for each of my accounts. A total return for all my accounts was not provided. 

Fee disclosure was interesting, especially as it relates to the disclosure of trailing commissions. I have mostly transitioned to an ETF portfolio, but still hold some actively managed mutual funds (~20% of my portfolio) for various reasons (i.e., ease of small monthly investments / parking of ETF distributions and areas where I feel that active management can add value like small caps / emerging markets / Asia-Pacific, etc.). Intuitively, I knew that I was paying the full MER of the mutual funds I own and that part of the MER (i.e., the trailing commission) is there to go to my advisor - but, since I have a self-directed account, there is no advisor to send the trailer to so my brokerage just pockets it. I knew this.

However, seeing trailing commissions being disclosed - $X per year in a DIY account with no advice brought some clarity of vision. I'm paying full-service rates, but am pumping my own gas. It is irksome. At least I'm not alone - the issue of brokerages pocketing the trailer in DIY accounts was raised in the recent Canadian Securities Administrators consulting paper 81-408 (released January 10) on eliminating embedded commissions in mutual funds:

* "discount brokers who provide execution-only services often distribute fund series that pay them the same trailing commission that would be paid to a full service dealer. The ‘one-size-fits-all’ nature of the trailing commission payment therefore seems misaligned with the provision of services and advice customized to the investor’s specific needs, expectations and preferences." page 15;
* "Those investment fund managers that do not offer a discount/DIY series typically make their regular retail series available for purchase through the discount channel. These series pay full unreduced trailing commissions of 1% to the discount brokerage for execution-only services" (page 125); 
* some dealers offer lower fee funds for DIY investors [e.g., Series D at RBC] , but availability is limited; and
* the bulk (roughly 84%) of mutual fund assets held in the online/discount brokerage channel remain invested in the regular retail fund series paying full unreduced trailing commissions to the discount broker (page 121).

For what it's worth, I've emailed my broker and asked them what relief they can provide vis a vis trailing commissions on my mutual funds.


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## Beaver101 (Nov 14, 2011)

^ Thanks for reporting this. Still waiting for BMOIL .. not sure what's taking them so long given they have supposedly one of the best brokerage systems in place. 

New revelation from CIBC IE on previously undisclosed "fees" - only thing I can think of is trailer fees for the use of their HISA fund (Renaissance) because I picked the A series since it seems the F series should be bought through an advisor (the fund facts doesn't specifically say though). 



> For what it's worth, I've emailed my broker and asked them what relief they can provide vis a vis trailing commissions on my mutual funds.


 ... I would be interested to hear about the response/results but not holding my breath in getting a favourable one. It would appears this CRM2 reporting is just a pony show ...


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## Nerd Investor (Nov 3, 2015)

I was mostly stocks and options, a couple of index ETFs so not really expecting any surprises. 
I'm more interested in/looking forward to the performance reporting. It would be kind of nice not to have to track myself in excel.


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## AltaRed (Jun 8, 2009)

Beaver101 said:


> It would appears this CRM2 reporting is just a pony show ...


The regulator is hoping this is a wakeup call for investors to start putting the heat on their financial institutions. The regulator has wanted to cut the trailers for some type but has not had the brass balls to make it happen due to powerful industry lobbying. The hope is that investors will start getting angry too and that will start to tip the scales.....or cause investors to move more aggressively to ETFs and away from mutual funds. Then there will be more momentum to kill trailer fees.

I've been part of the battle for several years lobbying for F series funds at discount brokerages but the mutual fund industry has been very stubborn. E*Trade was the first to allow F series when they first came to Canada in 1998? 1999? and I was able to buy a few F series through them before E*TRade was taken to task by their competitors and had to capitulate and back off. 

I am stlll waiting for BMO IL and Scotia iTRade to issue their 'cost' data for my accounts (not that it will be anything much).


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## Beaver101 (Nov 14, 2011)

^ A truly smart investor ... :adoration:


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## OnlyMyOpinion (Sep 1, 2013)

Actively managed funds and their costs discussed by Vaguard CEO Bill McNabb today (19-Jan-2017):

_... By contrast, active management's commercial struggles have reflected its disappointing investment performance. Over the decade ended December 31, 2015, 82% of actively managed U.S. equity funds and 81% of active U.S. bond funds have either underperformed their benchmarks or shut down....

Our research and experience indicate that active management can survive—and even succeed—but only if it's offered at much lower expense. High costs, which limit a manager's ability to deliver benchmark-beating returns to clients, are the biggest reason why active has lagged. Industrywide as of December 31, 2015, the average expense ratio for all active U.S. equity funds was 1.14%, compared with 0.76% for equity index funds. And the expense advantage is even wider for bonds; the average expense ratio for an active U.S. bond fund was 0.93%, compared with 0.43% for bond index funds...

These days, it's not hard to find an index fund that charges maybe 0.05% or 0.10%. So even if you have identified active managers who are skilled at selecting shares and bonds, to match the return of a comparable (much cheaper) index fund would require significant outperformance. Think about it. Any fund that charges 1.00% in expenses—not even the high end of the range—will find it extraordinarily difficult to overcome the index fund's head start...

Despite the well-deserved reputation of indexing and the challenges for active managers, there's still a place for traditional active strategies that are low-cost, diversified and highly disciplined, and are run by talented managers who focus on the long term...
_

https://www.vanguardcanada.ca/advisors/articles/research-commentary/markets-and-economy/Chairman-perspective-on-the-markets.htm


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## Bill G (Jan 8, 2017)

Beaver101 said:


> ... I would be interested to hear about the response/results but not holding my breath in getting a favourable one. It would appears this CRM2 reporting is just a pony show ...


National Bank responded within a business day, saying (my paraphrasing):

* Options on our platform to reduce trailer fees include buying Series D funds from providers (i.e., series with significantly reduced trailers)
* Some mutual funds are available without trailers, but may require a commission to buy them (but most mutual funds can be bought on our platform with no commission)
* National Bank has no plans to change its pricing [which I interpreted to mean no plans to rebate trailers a la Questrade and no plans to offer Series D for its National Bank line of mutual funds]
* ETFs are cheaper than mutual funds, and we have a groovy managed solution using ETFs called InvestCube that you should check out


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## Beaver101 (Nov 14, 2011)

Bill G said:


> National Bank responded within a business day, saying (my paraphrasing):
> 
> * Options on our platform to reduce trailer fees include buying Series D funds from providers (i.e., series with significantly reduced trailers)
> * Some mutual funds are available without trailers, but may require a commission to buy them (but most mutual funds can be bought on our platform with no commission)
> ...


 ... so funny on just more sneaky marketing ... why don't they suggest that their sister discount brokerage now offers purchasing + selling of ETFs (Canadians only?) to be commission-free?

Right now, I'm abit ticked off that there is a trailer fee on HISA (of at least 25bps) regardless which series you pick ... ie. one gets dinged for DIY parking and allowing the brokerage to use your money!


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## AltaRed (Jun 8, 2009)

Beaver101 said:


> Right now, I'm abit ticked off that there is a trailer fee on HISA (of at least 25bps) regardless which series you pick ... ie. one gets dinged for DIY parking and allowing the brokerage to use your money!


I don't know that is true. F series HISAs do not have a trailer fee but they can only be purchased through an advisor with whom you have a fee arrangement. AFAIK, all the in-house HISAs at the discount brokerages are Series A which carry a 25bp trailer fee. I've been through that with both BMO IL and Scotia iTrade where I've argued time and again that I receive no advice on these things and how can they possibly charge a fee? 

FWIW, I have stopped using discount brokerage HISAs in my non-registered accounts.... and rarely have a need to hold cash in a registered account either.


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## OptsyEagle (Nov 29, 2009)

You seem to believe that the trailer fee is a payment for advice. I am sure your discount broker would say that it is a payment to use their platform, since the equity trade commissions are pretty much a loss leader for the lion's share of investors. Try to buy a mutual fund without going through someone's investment platform and see how far you get. If your broker did not get some fees like that from someone they literally would go broke.

That being said. You don't need a survey of results to know that managed money will underperform the index. Think about it. What exactly is the index. It is pretty much the average results of all the stocks on the stock market. Sure it is a representative sample but I suspect it correlates to the total market of stocks pretty closely. Now ALL stocks are owned by someone and the lion's share of them are owned by institutions. The institutions, for the most part, are the managed money and the mutual fund managers are part of the institutional group.

So if the institutions own all the stocks and the index is the average of all the stocks, then the institutions average results will be the same as the index average results. Now if the institutions have a 2% fee and the index is measured without one, then it is an ABSOLUTE CERTAINTY that the average institution will underperform the index by exactly 2%.

Why people and reporters continue to go find data to prove that this certainty still exists, is simply beyond me.


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## AltaRed (Jun 8, 2009)

OptsyEagle said:


> You seem to believe that the trailer fee is a payment for advice. I am sure your discount broker would say that it is a payment to use their platform, since the equity trade commissions are pretty much a loss leader for the lion's share of investors. Try to buy a mutual fund without going through someone's investment platform and see how far you get. If your broker did not get some fees like that from someone they literally would go broke.


The trailer fee has always been in place as a means to pay sales advisors (and their brokerages). Worse, when FE or DSC funds ruled the roost, it was graft piled on top of graft. The banks are taking care of this latter perversity with no-load funds. Discount brokerages don't get paid trailer fees for stocks or ETFs. Why should they get paid trailer fees for mutual funds? Bottom line is they should not.

We would be much better off if mutual funds followed the same model as stocks/ETFs. Charge commissions of $5, $10, 1 cent/unit (aka Questrade), or better yet, no commission to purchase (aka Questrade for ETFs). What makes a mutual fund different from an ETF from a discount broker's perspective? Even more so, discount brokerages don't even manage the tax slips for mutual funds like they do for stocks and ETFs. They have even less work to do with mutual funds. I've made a number of submissions to the CSC on this matter when public input has been 'invited' and will continue to push that agenda.


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## OptsyEagle (Nov 29, 2009)

I am just saying that if all a discount brokerage did was offer equity trading, which includes ETFs, most would simply go out of business. They need investors in their own manufactured funds and they need them in funds that pay them trailers. What the fees were originally meant for has very little to do with it, at this point.

If my memory is in working order I seem to recall one fund company deciding to NOT pay trailers to discount brokers. I think it was TD that immediately removed them from their offered funds and wham bam, they were back to getting their trailers again. 

The trailer goes to the dealer. What the dealer does for it does not seem to be as important to the fund companies as bringing them an investor with money, is.


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## AltaRed (Jun 8, 2009)

OptsyEagle said:


> If my memory is in working order I seem to recall one fund company deciding to NOT pay trailers to discount brokers. I think it was TD that immediately removed them from their offered funds and wham bam, they were back to getting their trailers again.
> 
> The trailer goes to the dealer. What the dealer does for it does not seem to be as important to the fund companies as bringing them an investor with money, is.


My case was one where the discount broker (and I imagine the fund company) was quite happy to allow me to buy F series funds. I believe it was the full service commission companies that put the pressure on the fund company to stop that when they found out and the mutual fund company caved. 

I don't think the discount brokers care as much about the trailer as do the full service companies. After all, most DIYers with discount brokerage accounts do not buy many mutual funds in the first place, Mawer is one key exception, and in that case, some discount brokers will allow Mawer funds. IOW, the argument that the discount brokers need mutual fund trailer fees has holes in it.


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## pwm (Jan 19, 2012)

The December 2016 statement is there today at BMOIL. It shows time weighted and money weighted return for 2016 and "Fees you paid" which were zero for my account which has only ETFs.
Still nothing new at TDDI or Qtrade.


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## My Own Advisor (Sep 24, 2012)

AltaRed said:


> I don't know that is true. F series HISAs do not have a trailer fee but they can only be purchased through an advisor with whom you have a fee arrangement. AFAIK, all the in-house HISAs at the discount brokerages are Series A which carry a 25bp trailer fee. I've been through that with both BMO IL and Scotia iTrade where I've argued time and again that I receive no advice on these things and how can they possibly charge a fee?
> 
> FWIW, I have stopped using discount brokerage HISAs in my non-registered accounts.... and rarely have a need to hold cash in a registered account either.


I don't use discount brokerage HISAs very much either. The rates just aren't there. The only reason I keep some cash in our registered accounts is to make purchases every few months. 

Otherwise, I think it's good in your asset accumulation years to use PCF, EQ Bank, Tangerine, etc. to park cash. Just me.


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## Beaver101 (Nov 14, 2011)

AltaRed said:


> I don't know that is true. F series HISAs do not have a trailer fee but they can only be purchased through an advisor with whom you have a fee arrangement. AFAIK, all the in-house HISAs at the discount brokerages are Series A which carry a 25bp trailer fee. I've been through that with both BMO IL and Scotia iTrade where I've argued time and again that I receive no advice on these things and how can they possibly charge a fee?
> 
> FWIW, I have stopped using discount brokerage HISAs in my non-registered accounts.... and rarely have a need to hold cash in a registered account either.


 ... it is correct that Series A carry a 25bp trailer fee - this is identified on the product specs (Renaissance HISA). However, the specs also states: Series F: No trailer paid; the interest rates on Series F is the interest rate of Series A plus .25% for the R. HISA dominated in Cdn dollars. Does this mean you get an additional .25% on top of the posted interest rate if you pick Series F or does this mean your advisor gets .25%? Sounds like the latter to me ... in which case you get dinged either way.


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## Beaver101 (Nov 14, 2011)

pwm said:


> The December 2016 statement is there today at BMOIL. It shows time weighted and money weighted return for 2016 and "Fees you paid" which were *zero for my account which has only ETFs.*
> Still nothing new at TDDI or Qtrade.


 ... I guess you bought your ETFS either commissions-free or bought them before January 1, 2016.


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## Beaver101 (Nov 14, 2011)

My Own Advisor said:


> I don't use discount brokerage HISAs very much either. The rates just aren't there. *The only reason I keep some cash in our registered accounts is to make purchases every few months.
> *
> Otherwise, I think it's good in your asset accumulation years to use PCF, EQ Bank, Tangerine, etc. to park cash. Just me.


 ... well, there you go and instead of the cash (or "dead" cash as some call it) idling and piling there, why not put it to use until the purchase opportunity comes?


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## AltaRed (Jun 8, 2009)

pwm said:


> The December 2016 statement is there today at BMOIL. It shows time weighted and money weighted return for 2016 and "Fees you paid" which were zero for my account which has only ETFs.
> Still nothing new at TDDI or Qtrade.


I just downloaded my BMO IL statement too and saw the "fees you paid" which of course is what I expected (a few $9.95 commissions which I already know about), but of more interest to me in this whole exercise is the "payments BMO received from third parties" which is the key to the new cost disclosures. In mine, there is a small amount for, I imagine, a portion of the MER of a holding of XEF that I have. But it didn't identify XEF by name. Did BMO break out those numbers by ETF for you? Have you checked the math to see if it is the full MER for your ETFs? Or a portion only?

P.S. As far as the performance data, that was already avallable online anyway. BMO IL and Scotia iTrade have been providing performance data for some time. online, though not on paper statements.


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## pwm (Jan 19, 2012)

The "Payments received from third parties" is zero, so no breakdown. The only activity in this account was to transfer cash out every month. No buys or sells in 2016.
Holdings are: CBO, CDZ, XRE and CPD.


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## AltaRed (Jun 8, 2009)

pwm said:


> The "Payments received from third parties" is zero, so no breakdown. The only activity in this account was to transfer cash out every month. No buys or sells in 2016.
> Holdings are: CBO, CDZ, XRE and CPD.


That heightened my curiousity even more...and after analyzing my account for the full year, I now see that I held BMO's in-house HISA for just over 3 months and of course, that Series A HISA does pay a commission. That said, I have sent a Secure Message to BMO IL to ask them why they are not identifying the source (holding) so that clients can make informed decisions on their holdings. That response may take forever given I suspect brokerages will be flooded with client queries.

Added later: Found out when I examined my full year 2016 that I did own BMO IL's in-house Series A HISA for about 3 months. Hence the source of "Payments received by BMO from third parties".


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## agent99 (Sep 11, 2013)

Just looked over our BMOIL December statements. In all accounts, the income YTD and for the month are incorrect. In one account that has about $400k of dividend payers, they say we received $72 in dividends in 2016! The detailed transaction do show that actual dividends paid. I am sure they will be getting a lot of messages!


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## AltaRed (Jun 8, 2009)

Beaver101 said:


> ... it is correct that Series A carry a 25bp trailer fee - this is identified on the product specs (Renaissance HISA). However, the specs also states: Series F: No trailer paid; the interest rates on Series F is the interest rate of Series A plus .25% for the R. HISA dominated in Cdn dollars. Does this mean you get an additional .25% on top of the posted interest rate if you pick Series F or does this mean your advisor gets .25%? Sounds like the latter to me ... in which case you get dinged either way.


If you look at the returns by the investor of Series A versus Series F, you will find that Series A pays 25bp less than Series F, i.e. 0.75% vs 1.00%. That means you get 1.00% but that can only happepn if you are in a fee arrangement with the advisor, i.e. you pay him on a per hour basis or % of AUM basis. The advisor does NOT get the trailer fee.


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## Bill G (Jan 8, 2017)

Additional comments ...

* CRM2 worked on (or for) me in that it provided an incentive to look at lower cost options for mutual funds held in my DIY account ... I will be switching my remaining mutual funds to lower administrative cost Series D options ... this will reduce the administrative/trailer/service fee component of these holdings by up to 80% (from 125 bps to 25 bps, in some cases)
* I'm currently with National Bank Direct Brokerage and my current mutual funds are National Bank mutual funds, which do not offer a Series D option ... so my discount broker will get i) less money for nothing and ii) less money for their affiliate for money management services ... I'm voting with my feet, so to speak
* I became better educated on the option / availability of Series D funds ... as made abundantly clear by the CRM2 disclosure, my discount broker had zero incentive to advertise/promote/tell me about the availability of these alternatives
* If embedded commissions / trailer fees don't end up getting banned, the Series D option represents a workable solution for DIY investors who still want to hold actively managed mutual funds... the significant fee reduction reflects that there is no advisor and the discount broker gets compensated for costs related to administration / order execution / having a trading platform / and gets a commission for sending $$ to the fund company 
* If embedded commissions / trailer fees do get banned, I'm curious what discount brokers would do with respect to mutual funds? Some obvious solutions are trading fees for mutual funds, restriction on fund products (i.e., only from the broker's affiliate), and imposition of annual administrative fees (e.g., Questrade's rebate of mutual fund trailer fees only kicks in after a $30 per month fee).
* Many observers have noted that the CRM2 disclosure doesn't tell investors about all the fees they paid ... ETF management fees and expenses and mutual fund management fees and expenses (other than the trailer) aren't disclosed ... CRM2 only touches on the client-advisor or client-dealer relationship
* One interesting observation made by the mutual fund industry in discussing fee disclosure is that the playing field isn't level .... GICs and insurance products (segregated funds) aren't covered .... they envision many investors abandoning mutual funds and going to GICs because there are "no fees" with GICs (i.e., the bank that sold me those GICs is so nice, if only I could pay them somehow?)
* The old adage is that mutual funds are sold, not bought ... the CRM2 changes and looming (potential) bans on trailer fees will make things interesting in 2017 ... the trend towards ETFs and robo-advisors can be expected to accelerate


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## Franky Jr (Oct 5, 2009)

I gotta pipe in: CRM2 is a joke.
On my kids RESP TD accounts. (all e series with a blended MER of 0.45%).
I liked that it showed my MWR(XIRR). That's a win.
But fee disclosure. Ha ha horrible. No where does it show my MER. All it shows is the $$ amount of 'trailing commissions" TD received. Which in the case of my blended e series portfolio that has a blended MER of .45%, TD only shows 1/3 of that as an expense (.152% of trailing commission whereas true fee's are triple that)
CRM2 isn't good enough.


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## pwm (Jan 19, 2012)

Just wondering where you saw this info Franky. None of my December TD statements looked any different. Was there a separate document?


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## AltaRed (Jun 8, 2009)

Franky Jr said:


> CRM2 isn't good enough.


No, but it is a start. It took a couple of millenia to get to this point and one can argue that trailing commissions were the part that were mispresented the most by sales folk, e.g. no, there is no cost to you bullcrap

Even the most naive of investors understand that money managers, e.g. the Fidelity's of the world, charge management fees in order to stock pick and run the mutual fund. Very few understood there was a gravy train back to the dealers.


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## pwm (Jan 19, 2012)

I sent an email to TD asking about CRM2. Here's the reply:

_TD Direct Investing statements updates for CRM2 disclosure will be coming in March/April 2017. I've included some additional information. Please feel free to contact an Investment Representative (1-800-465-5463 or 416-982-7686, available 24/7) for further assistance. By phone they can securely access your account and assist you with any additional inquiries. 

Thank you for contacting TD Direct Investing. 
_

She attached a pdf file showing what the new statement will look like.


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## pwm (Jan 19, 2012)

I also asked at Qtrade Investor; their response:

_Thank you for your message.
The CRM2 reporting will start shortly (late January) and will be a separate statement from your monthly/quarterly account statements.
If we can be of further assistance, please feel free to contact us at the toll free number listed below._


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## GreatLaker (Mar 23, 2014)

pwm said:


> I sent an email to TD asking about CRM2. Here's the reply:
> 
> _TD Direct Investing statements updates for CRM2 disclosure will be coming in March/April 2017. I've included some additional information. Please feel free to contact an Investment Representative (1-800-465-5463 or 416-982-7686, available 24/7) for further assistance. By phone they can securely access your account and assist you with any additional inquiries.
> 
> ...


Thanks PWM. I am also waiting for this with bated breath, but I don't really know why. It will have performance reports, which I have already calculated myself and can see online in WebBroker. It will have cost reports which I can easily estimate myself: trailer fees on the <3% of my port I have in MFs, and trading costs.

The article by Dan Hallett at the following link says that performance reports must be received by July 15. Don't know if the deadline is the same for cost reports but probably is. http://www.highviewfin.com/blog/making-sense-of-your-new-crm2-performance-report/ I feel like a kid that was just told Christmas was delayed by 2 months


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## Franky Jr (Oct 5, 2009)

Screenshot of 2 pages sort of combined into one to show the highlights.
It's a new format and colour scheme. It looks nice.


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## humble_pie (Jun 7, 2009)

i for one regret the stronger emphasis on account *performance.* 

every client with options in his account, along with every client who has ever journalled an interlisted share holding from one currency to the other, is going to have a false performance report.

option holdings are falsely reported by almost every canadian broker (IB might be an exception) (note: realtime option quotes during market hours are accurate, the problem is the error-filled historical data which brokers use for their holdings/position pages.

the option errors are not the brokers' fault. These errors are coming from the quote services - often reuters - which in turn are picking up unreal "last prices" from OPRA, the US option pricing authority, & also from the montreal exchange, which utilizes a constantly-shifting mishmash of methodologies to report its last price after markets close. It's these wild pricings that make the performance calculators run amok.

with respect to interlisteds that have been moved from one currency to its opposite, what erroneously affects the performance calculators are the false cost bases that result. Brokers are - quite wrongfully - using the currency FX rate of the day of a journal transfer to evaluate what they call "cost base."

what brokers should be picking up is the FX rate of the security on the day it was originally purchased. In some cases, this date could be years prior to the date on which a stock holding was journalled to the opposite currency account.

the problem is that brokers can't do this easily, ie they can't carry so much additional data at any kind of reasonable cost to themselves.

these two weak spots are able to knock performance widgets for implicated investors into the twilight zone.

what might work imho is a system whereby clients would or could pay extra to enable the brokers to access the true FX costs of an interlisted security on the day it was purchased. Right now, it's the investor clients themselves who have to obtain & calculate this data, then inform the broker.

.


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## AltaRed (Jun 8, 2009)

humble_pie said:


> with respect to interlisteds that have been moved from one currency to its opposite, what erroneously affects the performance calculators are the false cost bases that result. Brokers are - quite wrongfully - using the currency FX rate of the day of a journal transfer to evaluate what they call "cost base."
> 
> what brokers should be picking up is the FX rate of the security on the day it was originally purchased. In some cases, this date could be years prior to the date on which a stock holding was journalled to the opposite currency account.
> 
> ...


Indeed. I had this very 'back and forth' conversation with Scotia iTrade less than a month ago (for the 3rd? time in perhaps 4-5 years). I even provided them with an example case.....but no, they insist on doing an intra-day conversion as of date of journalling....and at the retail rate yet (not BoC rate). The ACB in CAD equivalent could be way off....and worse, many investors may be using that wrong ACB data point on Schedule 3 when the security is sold. 

Some brokerages will change the converted Cost Base upon written instruction but not sure they all will.....and it is a PITA anyway. I just keep my own ACB data.

I agree with you this will lead to 'wrong' performance data but unless one wants 2 decimal places of accuracy, it won't have much impact....provided of course that investors are not journalling numerous positions on a regular basis. For most of us here, it is not all that relevant since we keep our own data in other ways.


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## humble_pie (Jun 7, 2009)

AltaRed said:


> I agree with you this will lead to 'wrong' performance data but unless one wants 2 decimal places of accuracy, it won't have much impact....provided of course that investors are not journalling numerous positions on a regular basis. For most of us here, it is not all that relevant since we keep our own data in other ways.



me i think it is highly relevant, perhaps not at the mo but it will be in the future.

altaRed u are good at looking into the future. Can i please ask you to gaze into that looking-glass once again.

it's clear to me that the ministry of finance is behind some of these statement revisions.

look at the annual mess over reporting capital gains here in cmf forum. Considering we are supposed to be the "informed" ones, just imagine how it is out there for regular taxpayers, or their accountants who beg their clients for their financial records (which the clients often can't find or don't possess any longer.)

imagine how the CRA just plain doesn't have the manpower to handle all these taxpayer questions, arguments, appeals. To help clear up the mess, for more than a decade the tax authorities have been after the brokers/financial institutions to prepare capital gains data for each investor, exactly as they already prepare annual dividend & interest data.

it's a multi-year process to get the brokers to comply. Last year, cmffer onlyMO posted a letter picked up from the association of securities administrators (these are the powers behind our broker accounts) to Revenu Quebec, regarding progress that was slowly being made in the tax authorities' quest to have brokers determine capital gains & capital losses for us erring, ignorant investors. Because the majority of us have never learned how to do this for ourselves.

i'd estimate that the broad national tax story on this issue is about 60-70% complete by now. Coming next will be the stage where the CRA *will* assess us capital gains & losses based on what the brokers will tell them. At that future point in time, it will be up to us as individiuals to appeal an erroneous CRA assessment.

this is why IMHO it's important right now to appeal strongly to the brokers, to get them to understand that we, the clients, do not approve of their false cost bases & their false performance widgets. IMHO we should *not* be making it easier for big brother to tax us based on wrongful data.

i have a couple ideas as to what to do long-term to make things more accurate for investors, but i know from past experience that it is desperately, mordantly, insanely, heartbreakingly difficult to get a bureaucracy to change. Although i did manage to do it once. That effort was crushing. One has to be able to present one's case better than a lawyer (apologies to mukhang pera if he happens to read here.)

PS with respect to any difficulties you might have had with a broker in establishing correct cost base: the CRA & the provincial tax authorities, via the minister of finance, have used the IIROC to draw up & enforce these new rules. The rules that will lead to crystallazation of sometimes-false capital gain/loss data for many investors.

but fortunately this is still canada, not some banana republic, so my understanding is that all the brokers are obligated to respect every investor who can make a proper case for adjusting the broker's erroneous cost base figure.

my thinking is that it's much easier to adjust quickly, at the broker level, than it will be years hence in the future when the CRA receives the false data (ie when the security is sold) & comes looking for the accompanying income taxes!

me i've been able to adjust 2 or 3 journalled holdings by simple phone call. At the TD i am finding some senior reps who are well clued into this problem, although they don't have a longterm solution any more than i do.



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## AltaRed (Jun 8, 2009)

One key would be if everyone here would tell their brokers to correct Cost Base when/after journalling assets and to 'raise some ruckus' when doing it. Increasing levels of 'noise' may start to have some impact.


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## humble_pie (Jun 7, 2009)

AltaRed said:


> One key would be if everyone here would tell their brokers to correct Cost Base when/after journalling assets and to 'raise some ruckus' when doing it. Increasing levels of 'noise' may start to have some impact.



i don't think they (brokers) pay any attention to ruckus. For objections to work, one has to be able to argue at least as well as mukhang pera (this is the hard part)

but i do update cost base figs promptly with brokers - i've only had 2 or 3 recently & i was able to update my way very easily by phone.

what it boils down to is that broker cost base - which they tend to call book value - is just One More Hassle to look after in an already complex world.

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## GreatLaker (Mar 23, 2014)

I got the following message from TDDI today. Performance and fees will be reported in April.



> Enhanced personal account statements will be available in early April for the period ending March 31, 2017. The improvements made to your account statements will help you stay informed by providing a summary of:
> 
> 
> Investments held in your account and any activity occurring during the reporting period
> ...


Here's the link to the video: http://players.brightcove.net/3612565588001/HJlR2WPK_default/index.html?videoId=5341184245001


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## humble_pie (Jun 7, 2009)

GreatLaker said:


> I got the following message from TDDI today. Performance and fees will be reported in April.




i rec'd the new-april-format message in december ...

as we all know, the TD along with all other brokers is complying with the new IIROC regs. However i can see several serious problems. These obtain across the board, at all brokers, not just the big green. 

performance calculators & false cost base/book value calculations are producing false results for all accounts that 1) have ever undergone even one cross-currency journal of securities, or 2) hold option positions, or 3) have been transferred in from another broker.

brokers have countless accounts featuring the above. They are all common occurrences. Fake figures result. Yet is currently very difficult to get a broker to modify its fake figures. Even as recently as a year ago, this task was easier.

of the two error fields - calculation of cost base vs market evaluation - the cost base errors are potentially far more egregious. This is because the Minister of Finance aka the CRA - acting through IIROC - appears to have charged brokers & other financial institutions with maintenance of a cost base & a capital gain/loss profile for each investor.

it is true that individual investor/taxpayers can maintain personal records that may challenge the CRA gain/loss assessments that will be coming in the (possibly near) future. But my guess is that challenging those broker-derived assessments is going to become increasingly difficult.

as for the performance widgets, these have been false for so many years for myself as an option trader that i pay them no attention. I am quite used to seeing the broker "evaluate" an option at $5.65 when, in fact, its true market value might be 41 pennies. A negative value of (5,650.00) for 10 contracts when the correct negative is (410.00) will certainly impair a performance widget! 

not to speak of margin calculations, which are also impaired by false option evaluations.

alas, the brokers are being forced to maintain figures even when they cannot procure accurate figures, so in all such instances they are faking figures.

what to do? i'm aware of the big challenges facing brokers, who are doing their best to comply with new IIROC regs. I'm sympathetic to the fact that it's too difficult or else too expensive or else both, for a broker to be able to present correct cost/performance data. What is alarming is that brokers are faking data nowadays, because the minister of finance is forcing them to do this.


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## agent99 (Sep 11, 2013)

agent99 said:


> Just looked over our BMOIL December statements. In all accounts, the income YTD and for the month are incorrect. In one account that has about $400k of dividend payers, they say we received $72 in dividends in 2016! The detailed transaction do show that actual dividends paid. I am sure they will be getting a lot of messages!


BMOIL have still not corrected our December statement. This despite several communications with them on-line and by phone. Last message I received was 3 weeks ago said they then agreed there were errors and that the issue had been sent to their backroom or whatever, for attention. Still waiting! Surely a bank should be able to provide accurate accounting??


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## AltaRed (Jun 8, 2009)

I suspect they have been busy with getting T5s and T5008's out until late last week. That said, I'd be interested in you reporting back what the problem was. How about your T5's? Are they correct (for your Cdn stock dividend component)?


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## humble_pie (Jun 7, 2009)

agent99 said:


> BMOIL have still not corrected our December statement. This despite several communications with them on-line and by phone. Last message I received was 3 weeks ago said they then agreed there were errors and that the issue had been sent to their backroom or whatever, for attention. Still waiting! Surely a bank should be able to provide accurate accounting??




i doubt any broker will be able to "correct" the many kinds of glaring errors any time soon. The software that would have to be appended to their systems - the massive new data bases & query/response sequelae that would have to be added - would be too costly.

it's clear that the brokers are being forced to provide sets of figures even when such figures may be false. With respect to cost bases - which affect performance data - the force is coming from the minister of finance, acting on behalf of the CRA & provincial tax authorities that are seeking to establish capital gain/loss profiles for all investor taxpayers. The intermediary being used to effect change is the IIROC.

the campaign has been going on, in increasing stages of intensity, for several years now.

as of december 2015, it was no longer permissible for brokers to maintain an N/A or "unknown" code for securities cost base evaluations. Regardless of whether or not brokers could carry out the task accurately, brokers were required to declare a cost base for each & every security, as of december 2015.

as a result, a fair amount of data is being faked. Most broker clients inquiring about these twin issues - cost base and/or performance calculators - will have noticed both the increased error reporting plus the hardening of broker attitudes over the past 15 months. Contested cases are being sent to nameless eviscerated "back offices," whose verdicts are, predictably, always going to be the same. Namely, that the broker is correct & the client is wrong.

what to do? actually i do have a plan in mind. The very first step is for investor clients to understand where their broker performance widgets & their broker cost base/book values are going wrong. Also why these data are going wrong. As i've mentioned, the brokers are not making these mistakes just to be mischievous. They are making mistakes because accurate data calculations are impossibly expensive to obtain & because they, the brokers, are being forced by the minister of finance.

agent99 might you be able to refresh us as to what your broker statement error(s) is, or are as the case may be.


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## agent99 (Sep 11, 2013)

AltaRed said:


> I suspect they have been busy with getting T5s and T5008's out until late last week. That said, I'd be interested in you reporting back what the problem was. How about your T5's? Are they correct (for your Cdn stock dividend component)?


We are away from Canada and have not seen TSlips yet. *The problem as mentioned before is that the income summary reports do not come close to matching the individual cash transactions. *I would expect T-slips to be based on individual transactions, but I will check all our 2016 transactions vs the T-Slips once we get back home. BMOIL have acknowledged that the system is screwed up. It's just taking them a long time to correct it.


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## AltaRed (Jun 8, 2009)

humble_pie said:


> agent99 might you be able to refresh us as to what your broker statement error(s) is, or are as the case may be.


That would be really helpful, especially for CMFers who may be having similar problems with BMO IL or any other broker. I admit to not checking the income summaries transaction by transaction for either of Scotia iTrade or BMO IL and have accepted their T5 data as correct. BUT the data feels directionally correct, i.e. about what I would have expected. Depending on Agent99's feedback, that may prompt me to go back and at least spot check my own.

Added later: My BMO IL income summary and T5 for eligible dividends and other income checks out just fine. Yet to come of course is Income Summary and T3 tax slips at end of March for Cdn domiciled ETFs and trusts like REITs.


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## agent99 (Sep 11, 2013)

AltaRed said:


> Added later: My BMO IL *income summary* and T5 for eligible dividends and other income checks out just fine.


Is that the Income Summary that is part of the December Statement? It should include income of all types.


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## humble_pie (Jun 7, 2009)

actually i don't see the income summaries or the T5s as any kind of issue. Brokers have been preparing these for decades. They are simple income aggregators. There's not much that can go wrong.

it's the newer cost base/market value/performance calculators that can be wildly off the rails, imho. 

as mentioned upthread, broker systems are falsifying cost base figures for all interlisted stocks that get journalled from one currency account to another (brokers are applying the FX rate of the journal date, which is wrong.)

broker systems are also frequently falsifying cost base figures for accounts transferred in from another broker. Brokers often apply market prices of the day of the transfer to cost base evaluations, or even cost base values that are 100% fictitious (i had a small <100k account transferred to a different broker a year or so ago) (their back office assigned some ludicrous cost base figures & nobody could figure out where they'd got their figs) (not even the back office itself could explain where it had got its figs) (it turned out that a back office data processor had made them up)

broker systems are also applying false evaluations to many - sometimes most - option positions since they often use "last trade" data for an option, even though such price may be stale-dated by many weeks. In my case, at one broker alone, evaluations, performance widgets & margin calculations are faked by $100-200k, usually on the negative side.

i have also seen brokers messing up cost base calculations when stocks divest, spin out or undergo other complex merger procedures. Dream Global REIT, for example, underwent a smallish special dividend capital reorg a few years ago. TD got the cost base details correctly. However BMO - where i also happened to hold the same security - did not.

all this being said, i can clearly see that brokers are not making these mistakes for sloppy or careless or mischievous reasons. The costs of increasing their data bases to provide proper query-response data are prohibitive. Currently the minister of finance - acting through IIROC - is forcing brokers to maintain cost base figures for all securities held, so for other than very simple & relatively recent buy/sell situations, brokers can & do invent false figures.

any false figure among either costs or market evaluations is going to destroy the accuracy of the so-called "performance" calculators, which brokers are also now required to provide.


.


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## AltaRed (Jun 8, 2009)

agent99 said:


> Is that the Income Summary that is part of the December Statement? It should include income of all types.


No. The income data (for the month and YTD) provided on each monthly statement is basically meaningless. No value whatsoever. 

It is the income summaries that come with each of the tax slips that is the more important data. As hp said though, the brokerages are just aggregators of data that comes in from the transfer agents and they spit it out on the income summaries (and tax slips). A lot of cash accounts will have 3 or tax slips associated with that account. Examples:
- a T5 for eligible Canadian dividends and that may include Foreign Income from US domiciled ETFs (although a separate T5 for USD sub-accounts) and GIC interest and bbrokerage account interest
- separate T5 for each ISA type mutual funds 
- separate T3 for each mutual fund family, e.g. Fidelity, Mawer, etc.
- separate T3 for REITs and Cdn domiciled ETFs

What hp is talking about is a different issue, i.e. brokerages carrying the right Cost Basis for each asset, taking into account transaction based forex rates (they don't), etc. all of which has an impact on the Performance Return information. The CRM2 information now being provided is really 'directional' only and could be way off depending on the nature of one's account holdings, or for the average type investor, reasonably accurate...especially if all investors do is have a CAD cash account and don't do anything more complicated than hold stocks, ETFs, bonds, GICs, mutual funds.

What I do like about the new CRM2 disclosures is that brokerages must at least now provide performance data (can't be hidden by nefarious full service investment salesmen) and there is now disclosure of trailer fees, etc. (even if incomplete). It at least starts the conversation going and we will hear more about it some day in a down year when mutual fund investors realize their broker gets paid even if the investor loses money.


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## Eclectic12 (Oct 20, 2010)

humble_pie said:


> actually i don't see the income summaries or the T5s as any kind of issue. Brokers have been preparing these for decades. They are simple income aggregators. There's not much that can go wrong ...





AltaRed said:


> ... As hp said though, the brokerages are just aggregators of data that comes in from the transfer agents and they spit it out on the income summaries (and tax slips). A lot of cash accounts will have 3 or tax slips associated with that account. Examples:
> - *separate T5 for each ISA type mutual funds *


Is this $ value based, maybe?
I have yet to see a separate T5 for my ISA type MF where the annual trading summary is until this year, the only document that has it. The new T5008 being the sells from the annual trading summary means this year it's on two documents but I expect that when the T3's are all in - the ISA MF won't be there like the last several years.



AltaRed said:


> ... - separate T3 for REITs and Cdn domiciled ETFs...


This seems more date based to me than anything else. 

Some years the ETF has it's own T3, some years it's on a form with say three REITs with the fourth REIT on it's own and then another year, there's two REITs per T3.


Cheers


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## agent99 (Sep 11, 2013)

AltaRed said:


> No. The income data (for the month and YTD) provided on each monthly statement is basically meaningless. No value whatsoever.
> 
> It is the income summaries that come with each of the tax slips that is the more important data.


Seems we are talking about separate issues. 

My complaint to BMOIL was about the income summary on our December statement. It is totally wrong. I would expect a bank to be able to produce a report that correctly adds up the income that was received during the month and the year to date and get it right. Hardly rocket science. Nothing to do with tax time. Just a cross check against our own year end income numbers.


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## AltaRed (Jun 8, 2009)

agent99 said:


> Seems we are talking about separate issues.
> 
> My complaint to BMOIL was about the income summary on our December statement. It is totally wrong. I would expect a bank to be able to produce a report that correctly adds up the income that was received during the month and the year to date and get it right. Hardly rocket science. Nothing to do with tax time. Just a cross check against our own year end income numbers.


Okay, I understand. But you will get all that with the aggregate of your income summaries that come with your tax slips too. I've never really paid attention to the sums on my monthly statements.


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## AltaRed (Jun 8, 2009)

Eclectic12 said:


> Is this $ value based, maybe?
> I have yet to see a separate T5 for my ISA type MF where the annual trading summary is until this year, the only document that has it. The new T5008 being the sells from the annual trading summary means this year it's on two documents but I expect that when the T3's are all in - the ISA MF won't be there like the last several years.
> 
> 
> ...


I have always gotten a separate T5 for the income off my ISA in each brokerage account (both with BMO IL and Scotia iTrade). They've never been on the same T5 as my Cdn stock dividends.

And yes, I agree there can be any number of tax slips...depending on timing, type, etc. I was merely trying to point out examples of how many.


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## humble_pie (Jun 7, 2009)

agent99 said:


> My complaint to BMOIL was about the income summary on our December statement. It is totally wrong. I would expect a bank to be able to produce a report that correctly adds up the income that was received during the month and the year to date and get it right.




now that u have alerted us, i checked my december statement. It is 100% accurate. The income reported for the year ending 31 december/16 coincides precisely with the tax slips & therefore with the annual Summary of Investment Income form.

agent is it possible you have an exotic form of income, perhaps some returns of capital for reits for example, which is why your own records deviate from the broker? there has to be some logical explanation as to why your income statement should be defective whereas mine is correct ...

what does dismay me is that so many performance calculators are wrong. Countless clients, perhaps the majority of clients, transfer accounts from one broker to another at some point in time. Cost base figures notoriously do not transfer accurately. Poof, the performance widget for that account will thenceforward show a false reading.

plus nowadays many clients are journalling shares from one currency to the other. Not only for gambit purposes, but also because a number of leading canadian companies pay dividends in USD, so investors keep those shares in US accounts in order to avoid broker FX fees on the dividends.

what happens is that all cross-journalled shares end up with false cost bases. Because the brokers are using the FX rates of the day of the journal, which alas is wrong.

.


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## humble_pie (Jun 7, 2009)

AltaRed said:


> What I do like about the new CRM2 disclosures is that brokerages must at least now provide performance data (can't be hidden by nefarious full service investment salesmen) and there is now disclosure of trailer fees, etc. (even if incomplete). It at least starts the conversation going and we will hear more about it some day in a down year when mutual fund investors realize their broker gets paid even if the investor loses money.




the foregoing revelations are really only useful to mutual fund clients & to clients of traditional fee-based advisors, no? 

i can't see how such disclosures have any significance for discount broker clients though. Surely we're not the ones paying trailer fees without knowing about it? surely we're not the ones being led up the crick by NFSIS? or even common & garden variety FSIS, never mind nefarious ...

now you takes you Performance Widget & you takes a whole field of deliberately faked-up cost bases & you arrives at an alleged performance that is maybe $150,000 above or below what it should be. Now you have got Nefarious. Seriously Nefarious.

.


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## AltaRed (Jun 8, 2009)

It depends oh how many investors have high cost MER mutual funds at discount brokers. Probably precious few BUT the point I was making is the new disclosure will/should give the average investor (be it with a full service advisor or a bank financial advisor) a wakeup call.


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## kcowan (Jul 1, 2010)

I think what the process illustrates is that no one has a correct idea about your holdings and their cost base (plus the fees for full-service suckers). How long will it take those full service investors to wake up and switch?


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## agent99 (Sep 11, 2013)

Another odd change on BMOIL. 

This morning when I went to check how stock prices changed yesterday in Portfolio Quotes, I got a blank screen except for this message:

*There are no equities or options in your account.*

Our holding are still there under positions, but nothing under Portfolio Quotes. Market Watch and My Watchlist on Home page are also unpopulated. 

Presumably this will get fixed.....


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## AltaRed (Jun 8, 2009)

Decided to check my own BMO IL account and same issue. A little maintenance going on me thinks. Best time to do that sort of thing is off hours on the weekend oviously.


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## agent99 (Sep 11, 2013)

Looks like they got it fixed.


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## agent99 (Sep 11, 2013)

Hmm, I seem to be having bad luck with BMOIL these days 

Thinking of adding to foreign allocation, so wanted to look at ETFs. BMOIL have an ETF screener, so thought that might be a good place to start. When I click on that, this is what I get:


*Morningstar	* 
_ For your security, you've been logged out of the tool. You have to re-login._

Tried relogging in to BMOIL and that doesn't help.


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