There has been a lot of negative press around the advice in which Canadian banks provide. I have mixed feelings about what’s being said as I come from working at one of the big banks. A big part of my responsibility was training advisors. There were a lot of great advisors who would always do what’s best for their client. That said, I know from experience that it is the banks goal to increase sales and achieve sales targets, which is no different than most companies out there. I have no problem with companies making money and having a focus on bringing in more revenue. The problem I have is how they do it.
I have been in a situation where someone in upper management told one of my advisors that we shouldn’t be helping at time of claim and that our job was to sell, sell, sell. I lost my mind and wholeheartedly disagreed with that thought process. That client was going through a difficult time, and her relationship was with that advisor. That advisor cared about her client and wanted to help make sure that the claim handled correctly. Instead of being praised for doing what’s right, she was singled out in a meeting and shamed for taking time away from selling. That was the day I realized I needed to become an independent broker.
Personally, I do not believe the bank itself would encourage that type of behaviour. In my opinion, it was just a side effect of someone in management wanting to achieve sales target. When a culture revolves around sales, you may find some doing what ever it takes to achieve their numbers. While the banks may not tolerate those who are acting outside of their code of conduct, the pressure to sell and the fear of losing a job may create that type of demeanour. With that said, there are many advisors working at the bank who are trustworthy and will act with integrity. I was one of them, and I always did what’s right for my client first while working at the bank.
What’s the most significant issue I have with the banks? It’s the products that they offer. Creditor Insurance is a prime example. This is the insurance you can purchase which is attached to a mortgage, loan, credit card or line of credit. Creditor Insurance is typically way more expensive than a personally owned policy and is less likely to pay out at time of claim. Why do so many decide to purchase it? Simple, they bought it from a bank advisor who did not let them know about alternative options.
Think about it, the banks have a captive sales force meaning they can only sell their products. These advisors are being trained on how to position these products and may have cross-sell targets that need to be met. They also have not been taught on what other solutions may be available outside of the bank. When buying from a bank, you may be buying from an respected advisor who understands their product. The question is, could there be a better solution available from another company that the bank isn’t telling you about?
Why does this happen? Well, it’s not actually the banks fault. At the branch level, advisors are only allowed to provide advice on authorized types of insurance like creditor insurance. Advisors at the branch level are restricted by the Bank Act which prevents them from discussing other types of insurance relating to a specific risk or policy. In fact, the Bank Act also prevents that advisor from referring a client to another insurance agent or company. The bank can have an insurance division as a subsidiary of the bank. While the branch can not directly refer a client to these channels, the advisor within these channels are able to sell and provide advice on insurance products. Like any captive salesforce, they would be restricted by their company to which products they will be able to offer.
Here is another example of a product which I bought into and felt that I was taken advantage of after learning how it works. We purchased an investment condo and was going to put money down on it. It just so happened that we received an offer from my bank to borrow up to the max limit on my credit card at 0%. I quickly did the math, and 0% interest is much better than paying the 4% on my line of credit, so I called to take advantage of the offer. This is where things got interesting. I have always paid my credit card off in full every single month. However, the next month when I got my statement, I saw a significant interest charge. This made no sense to me as I paid the full amount. What the bank failed to tell me was that I shouldn’t be using my Visa if I am taking the 0% offer. While I thought I was paying my credit card purchases in full, I didn’t realize that only a portion of my payment went towards my purchases and the other portion automatically went towards paying back the loan. This means that I was being forced to pay 18.99% interest on a portion of any purchase I made on my Visa until my 0% loan offer was paid off. I was furious and called right away. In the bank’s defence, they did reverse all charges, but it left me wondering how many people out took advantage of this same offer and not really realize how much it’s costing them?
Why does the bank continuously send me mailers on these types of loans? Shouldn’t they be more upfront on how these products work and help me determine if it is the best solution to help me achieve my desired goal? I often ask myself who do these types of products benefit the most?
Can you trust the banks? If the product is the right fit and you are working with a good advisor, I would not hesitate to do business with the bank. However, the question you should really be asking yourself is how do you know if the product is the right fit or not? There may be better alternatives that the bank advisor isn’t trained on or able to sell. This is one of the biggest advantages of working with an independent broker like myself. If a product from the bank is the right fit, we can help you secure that coverage. When working with an independent broker, you are working with someone who is working for you and not the bank.
Here are a couple articles that inspired this blog post.
Looking for a second opinion from the advice you received at the bank? We would be happy to discuss without expecting you to buy anything from us.
By Jeff Romansky
CHS, CPCA Principal, SecurePlan Insurance Solutions
Jeff started his insurance career in 2006 when he joined RBC Insurance. During this time, he helped hundreds of insurance advisors grow their business by providing them with comprehensive advice, consultation and training. His commitment to building strong relationships, paired with his positive attitude and specialized expertise led him to win multiple awards including being #1 in his position throughout Canada on numerous occasions.
After nine successful years at RBC Insurance, he decided to pursue his dream and start his firm to help professionals, executives and owner-managed businesses with their individual insurance and employee benefits. Jeff proudly serves clients throughout Southwestern Ontario and the GTA.
Jeff Romansky is a broker, so you can be confident that he is working for you and not the insurance company. He consultative approach is welcomed by his clients as they never feel pressured and are always correctly informed. When necessary, Jeff will work with or bring in trusted partners to meet your overall financial goals. He is committed to building long-term relationships with all his clients and viewed as a trusted partner to many.
Jeff’ resides in Grimsby with his wife and daughter. When Jeff isn’t hard at work, you can find him with friends on the golf course, curling rink or camping with his family.