The damning verdict from the Financial Consumer Agency of Canada on sales practices at Canada’s Big Six banks is merely the “tip of the iceberg”, according to one advisor.
The FCAC examined Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada after media reports last year alleged underhand tactics, such as selling services without the customers’ consent.
The review did not find mis-selling, but it did slam the banks for working cultures that put incentive and reward systems above client interest, and concluded that there are “insufficient” controls in place to prevent sales of products that are unsuitable for consumers.
Jason Pereira, senior financial consultant at Woodgate Financial and IPC Securities Corp, said he was unsurprised by the report, comparing the findings about the banks’ retail cultures to the Wells Fargo scandal in the US, where employees created phony accounts to earn fees and boost sales figures. Pereira claimed the demands of working for one of Canada’s Big Six are well known.
He said: “The immense pressure they put these people under, is it any wonder that if you push people and tell them that they are not going to be able to keep their jobs, they are going to do unethical things? Of course they are.
“If the Freakonomics series of books has taught us nothing else, it’s that incentives matter because incentives drive action. Right now, the incentive structure in Canada is such that they have squeezed every penny they can out of the consumer and now they have to go to the jugular to get what they need in terms of growth.”
Jason De Thomasis, financial planner at De Thomas Wealth Management, said he sympathises with employees who, because of the banks’ structures, are the ones feeling the heat on the front line.
He said: “I would never speak ill-will of someone in a similar position to myself. It’s a difficult position, you are always trying to sell something regardless of whether I agree with what you are selling or not.”
He added: “I feel bad almost for those people. I have no idea how the banks operate but I’m assuming if they don’t do so, there is someone else lined up that’s willing to make the sale.
"I really do feel for them because banks have to meet shareholder expectation and do have to worry about their share prices and profit, which I believe could be at least perceived as a conflict. It’s a very difficult balance, hence the reason why we prefer to be independent so we don’t have to worry about that.”
Pereira agreed with the fact the pressure trickles down from top and said targets are set by people who have “no idea what the actual human cost is on that bottom line”.
He said: “It is possible to do the right things in the banks and it’s possible to do the wrong things as an independent. I just think the incentive systems are aligned more to do the wrong things in the bank.
“[For an independent advisor] it allows anyone who wants to be transparent, anyone who wants to operate in an ethical manner, to say I don’t care that my pay cheque goes up by the extra dollar to screw this person over; I don’t want to screw this person over. We are allowed to create our incentive structures and systems for how we are going to get there.”
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