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Welcoming a new era of transparency

Canadian investors may want to review their investment statements with extra care starting this month. For the first time, they will detail exactly how well their individual portfolios have performed over time and how much they paid in actual dollar terms for the advice they have received. These two new disclosures, which are part of the recent regulatory changes called Client Relationship Model Phase 2 (also known as CRM2), may result in “sticker shock” for some investors, leading to important and perhaps difficult conversations with their advisors in the weeks ahead. But we believe ongoing efforts to improve transparency and provide Canadians with greater clarity about their investment performance and associated fees is a definite step in the right direction that should strengthen the client/advisor relationship over time, not diminish it. Investors should feel particularly empowered by the changes and the opportunity to become more engaged with their finances. They now have more information at their disposal to truly assess the value of the financial advice they are getting. By knowing how much bang they’re really getting for their buck, they can more easily compare the type of advice they are getting with all the other investment advisory options out there, whether that’s fee-based, commission-based, robo or self-directed. For instance, some investors may decide to forgo paying their financial advisor one per cent in commissions to construct a basic portfolio of broad-based mutual funds. As an alternative, they may look to save by building a low cost portfolio on their own with exchange-traded funds like iShares core suite of ETFs. But if that same advisor charging one per cent offers additional services, such as objective setting, regular portfolio reviews and/or retirement planning, then perhaps paying more is worth it. To know for sure, it may be a good idea for investors to “shop the market” once they’ve mulled their statements over and interview a handful of advisors about their own unique value propositions. Advisors, for their part, should view this shift to greater transparency as an opportunity to truly differentiate themselves from the competition. This wasn’t an easy task for them in the past – even for the really good ones — because comparing one set of performance figures and fees against another was overly complicated. Of course, more easily made comparisons will put more onus on advisors to prove their worth. Again, this is where our business – iShares ETFs – can help by offering them and their clients a range of low cost ETFs and other value-add services and tools focused on portfolio construction, risk analysis and market insights. Ultimately, we believe that CRM2 will level the playing field so that investors and advisors can make better decisions together. Other regulatory changes including a ban on embedded commissions and a fiduciary standard governing advisors may still be needed to achieve even better balance in the relationship, but these new statement disclosures are a good start. Warren Collier is a managing director and head of iShares Canada. He is a regular contributor to The Blog  iShares® ETFs are managed by BlackRock Asset Management Canada Limited. Commissions, trailing commissions, management fees and expenses all may be associated with investing in iShares ETFs. Please read the relevant prospectus before investing. The funds are not guaranteed, their values change frequently and past performance may not be repeated. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date indicated and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader. © 2017 BlackRock Asset Management Canada Limited. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. Used with permission. iSC-2630

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Maverick Capital eyes rebound on bets Trump may roil Wall Street

U.S. President Donald Trump's policies could lead to more violent stock market movements, something prominent hedge fund manager Lee Ainslie said could help his portfolio rebound after a lousy 2016. Ainslie's $11 billion Maverick Capital missed out on a rally sparked by Trump's unexpected election in November and ended the year with double digit losses in its biggest funds, underperforming the broader stock market and most hedge funds.

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Nasdaq backs trading illiquid stocks only on listing exchange

By John McCrank NEW YORK (Reuters) - Nasdaq Inc will ask U.S. regulators under the Trump administration to limit the trading of shares of small companies and illiquid exchange-traded funds to the exchanges on which they are listed, the market operator said in a note to clients. Such a move would make it cheaper for investors to buy and sell small-cap stocks and niche ETFs, spur more trading, and improve market transparency, Tal Cohen, Nasdaq's head of North American equities, said in the Jan. 19 note, reviewed by Reuters. Under current stock market rules, all U.S. stocks and ETFs can be traded on any of the 13 registered U.S. stock exchanges, regardless of where they are listed, a system aimed in part at promoting competition and adding resiliency to the market.

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