A group of securities and insurance regulators have greenlit new disclosure rules that will make it mandatory for Canadian asset managers to report the total cost of owning investment funds and segregated funds as part of a client’s annual investment statement.
On Thursday, the Canadian Securities Administrators (CSA) – an umbrella group for provincial and territorial securities regulators – and the Canadian Council of Insurance Regulators (CCIR) published enhanced requirements for the way mutual funds, exchange traded funds, scholarship plans and individual segregated funds – which are funds that have an insurance component to them – report the total cost of investing to clients.
“Investors need to be aware of and understand the costs they pay to assess the value they receive and to make informed decisions,” CSA Chair Stan Magidson said in a statement. “These changes will bolster investors’ and policy-holders’ awareness of the ongoing embedded costs of owning investment funds and individual segregated fund contracts, including management fees and trading expenses.”
The changes – which will not come into effect until Jan. 1, 2026 – will appear in the total cost-reporting disclosure requirements for all Canadian asset managers. Clients will receive their first enhanced annual report at the end of 2026.
The new disclosure follows years of industry debate around the transparency of fees and the cost of financial advice. In 2016, regulators approved the first set of rule changes to investment statements, known as the second phase of the client relationship model, or CRM2.
CRM2 required all Canadian financial companies to provide annual statements that highlight how well investments have performed in dollar amounts, as well as the dollar figure an investor has paid for financial advice. However, CRM2 only focused on the amount paid either directly or indirectly by an investor to an investment firm, such as trailer fees – commissions paid out to investment advisers for the length of time an investor holds a fund.
But regulators excluded one of the main costs an investor pays: the management expense ratio, also known as an MER. The MER combines the management fee, operating expenses and taxes, and is charged as a percentage of a fund’s total net assets for the year.
As well, CRM2 did not include trading expense ratios, known as TERs, which cover the costs of trades executed by the manager overseeing the funds.
Now, the CSA and CCIR – along with a joint project committee that includes the Canadian Insurance Services Regulatory Organization and the New SRO (formed with the amalgamation of the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada) – have approved changes to update annual statements and report the full cost of owning investment and insurance funds, including both the MER and TER.
The information must be expressed as both a percentage for each fund, and as an aggregate amount – in dollars – for all funds owned by the client during the year.
“This additional transparency will help investors ask their dealing representatives and life insurance agents the right questions and make better informed decisions, which should ultimately result in better investing outcomes,” added Mr. Magidson, who is also the chair and chief executive of the Alberta Securities Commission.
For securities investors, current account statements will be expanded to include the fund expense ratio as a percentage for each of the investment funds a client owns. Additionally, annual cost and compensation reports – which are typically sent out to clients at year-end – will include the total dollar cost of owning the investment funds over the past year.
For segregated funds – which currently do not send out annual reports – a new annual report will be sent to clients with similar information to investment funds, including the MER in a percentage and dollar amount. The insurance report will also include the aggregate cost of insurance guarantees in a segregated fund contract, in dollars.
“The insurance guidance will enhance policy holder protection by improving policy holders’ awareness of their rights to guarantees under their segregated fund contracts and how their actions might affect their guarantees,” the CSA said.
While prospectus-exempt and labour sponsored investment funds are not included in the new disclosure requirements, the CSA said it “may consider” making proposals to include the funds at a future date.
Clare O’Hara