On June 10, 2020, the Canadian Securities Administrators sent out a notice by means of a broadcast e-mail (the Notice) confirming that effective immediately portfolio managers (a PM) can register "client relationship management" (CRM) specialists as advising representatives (AR). A CRM can interact with clients, but cannot give stock picking advice (e.g., analyzing and selecting individual securities) to clients, and there registration as a CRM is subject to certain terms and conditions (see below).
The advantage of a CRM, particularly in a large PM firm, is the person does not have to satisfy all of the proficiency requirements of an AR, which should encourage operational efficiencies as the CRM can deal with clients about certain matters, while ARs can focus on providing investment advice to such clients.
Current PM Business Model
Currently, ARs giving stock picking advice to clients on behalf of a PM must satisfy certain educational requirements (e.g., CFA) and have certain relevant investment management experience (RIME) over a specified period of time. Associate advising representatives (AAR), who can also give stock picking advice to clients, provided it's approved by an AR, must satisfy certain less onerous educational requirements and a different period of RIME.
New Rules for Advising Representatives acting as CRMs
As a result of the Notice, a person can now be registered as an AR who is a CRM. The person still has to satisfy the educational requirements of being an AR, but they do not have to satisfy the RIME requirements. A CRM can interact with clients, can recommend pooled funds and model portfolios (that are advised by or have been developed by an AR, respectively), determine asset allocations, and formulate and draft investment policy statements for clients, but they cannot give stock picking advice to clients.
CRMs do not have to be called "client relationship managers", but if that's not their title they are required to ensure that all client communications and marketing materials refer to them acting in such a capacity (e.g., on the PM's website, e-mails and business cards). A CRM also cannot use any title that would suggest that they can give stock picking advice to clients.
CRMs must also advise all clients that they deal with about the limits of the advice that they can give, and that an AR will provide them with any stock picking advice they require, either on a discretionary or a non-discretionary basis depending on the circumstances.
A CRM can also review and approve advice given by AARs, provided such advice does involve any stock picking advice, which must be provided by an AR.
As noted above, CRMs are also subject to certain standardized, non-negotiable terms and conditions which are set out in the following link:
A CRM can also over time obtain the required RIME to become an unrestricted AR and to have the CRM terms and conditions removed from their registration.
Originally published 18 June, 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
