The Big Six Bias

Today, many of us have fragmented relationships with our financial institutions. Gone are the days when we would head to our local bank branch to take care of our monthly bills, deposits, withdrawals and update our bank books, all done with a smiling teller behind the counter who often knew our names and maybe even the names of other members of our family. 

When we had a major financial event such as a mortgage or investment to discuss, we would schedule a meeting with an account manager. Due to technology, that’s all changed.

Banks were early adopters of technology that, on the surface, was meant to reduce the amount of time we needed to complete our financial transactions; the reality is quite different. Banks used technology to effectively have us, their customers, complete many of the tasks that used to be done by their employees! Over time, Canadians went less and less to their neighbourhood branch and instead, as it has been for several years now, complete most of our financial transactions online.

Without the personal connections in our bank branches, many of us now use other institutions and services, such as mortgage brokers to secure mortgages, and independent advisory firms like RGF Integrated Wealth Management (shameless marketing plug!) for investment and retirement advice. Banks push to have technology streamline their operations and increase their profitability, which has caused massive fragmentation of how Canadians receive advice and conduct financial transactions. Banks know this and are in an all-out push to regain their market share on financial products they have lost…especially the most profitable ones.

You can see the signs everywhere: “Ask us how you can pay off your mortgage early”, “Do you want to retire early? Ask one of our advisors how we can help”. There are the unsolicited phone calls from bank call centers highlighting this product or that and even cross-selling at the teller on a regular basis.

The sales culture in banks is so strong today, that many employees have been speaking out anonymously about the pressure they say they feel to sell bank products to their customers, regardless of the customers’ needs. Earlier this year, The Financial Consumer Agency of Canada (FCAC) reviewed more than 4,500 complaints about sales practices at the “big six” banks.

That being said, the regulator found that the requirement for retail banking employees to sell products and services "can increase the risk of mis-selling and breaching market conduct obligations," but also said it "did not find widespread mis-selling during its review."

Contrast this with what bank employees are saying. Recently, the CBC ran a story on sales practices by the big 6 banks and interviewed employees anonymously. According to them, "Sometimes two, three times a day, you'll get an email wanting to know where are your sales numbers at? What have you sold today?" says one bank’s financial adviser. "Now that this [FCAC] report has come out, the [sales] pressure is 100 per cent full force. It's every single day. 'How many products did you sell?'"

In an interview with the CBC, FCAC deputy commissioner Brigitte Goulard said she "can understand" why bank employees and customers might feel disappointed by the regulator's report. "The bank environment is a sales environment," says Goulard. "If you're not a salesperson, perhaps working in a bank is not for you … People [bank customers] need to know that the bank is not there to look after their interest."

Sadly, this does not come as a shock to me. If I may, I’d like to relate a personal experience that I had a few months ago. Back in September, my wife and I sold a property we owned and as is typical during the conveyance process, our notary paid out our mortgage. The mortgage was issued by one of the big 6 banks, secured through a mortgage broker. Confirmation that everything was done followed in due course and we thought that was that. Not so fast! Within days of discharging our mortgage, I began receiving calls from a branch representative wanting us to come in to the branch to “discuss our account”. I respectfully declined and told her that we no longer have an account as we closed it when our mortgage was paid out, and we do our banking etc. with other institutions.

A month or so later, more phone calls from the branch, this time from different people, with the same message. To be honest, the calls were so frequent that I simply let them go to voicemail and deleted them. Then, fully 6 months after our mortgage was paid out, I received an ominous message from the bank’s call centre. Given the tone and content of the message, I called back. When I connected with the fellow who had called me, he was very direct, bordering on aggressive. He proceeded to tell me that I needed to make an appointment to see a branch representative at so-and-so branch and that I needed to make the appointment through him to “discuss my account”.

I told him the same story I told the branch staff who had called before but he was having none of that. He told me that I “had to” go to the branch. I explained that I was not going to make an appointment, that there was no need as my account was closed. He then said that if I didn’t, it would affect my credit rating…and when I argued that, he hung up on me!

After discussing this with my wife, I called back and asked for the manager of the call centre. I explained the experience I had with one of his employees and ask that he review the tape of our conversation and once he did, I wanted to know what was going to be done. He assured me that my experience was not acceptable, that he will personally look in to it and call me back with how they planned to remedy the situation. Weeks passed…he never called back. It’s one thing to try to sell more products to existing customers, I get that. But to say something that is false to “get the sale” or generate an appointment is unacceptable. After this experience, I agree with Deputy Commissioner Goulard, "The bank environment is a sales environment…(and bank customers) need to know that the bank is not there to look after their interest." ■

Source: (Johnson, E. (2018, Apr 22), www.cbc.ca)  

Business Owners

The most overlooked area of financial planning for business owners and incorporated professionals is the lack of integration between corporate and personal assets. When the majority of your assets are in your corporation you need very specific, specialized and personalized financial advice.

Learn More