Sales disguised as financial advice

You generally don’t set foot in a bank in a state of great distrust of the employees. But a disturbing investigation from the show Marketplace, from the CBC, urges the greatest vigilance. Thanks to hidden cameras, we see financial advisors transmitting false information and offering products contrary to the interests of clients to achieve their sales objectives.

To find out how things work in the advisor offices of the country’s five largest banks – RBC, BMO, TD, Scotia and CIBC – mystery shoppers visited branches of all these brands in Toronto and Vancouver. Some comments make your jaw drop.

On the subject of mutual funds, at least two financial advisors say that management fees are only charged on returns, while another promises at least 10% profit per year. When a client asks what to do with a $50,000 inheritance, no one suggests she first pay off in full the high balance on her credit card at 19.99% interest. It would be more judicious to invest the sum, we make him understand.

Current and former employees of major banks also tell the journalist how strong the pressure is to sell credit cards and open lines of credit, even to customers who have not asked for anything. The goal: to reach the quotas imposed by the bosses and increase profits.

Obviously, granting credit is not a trivial gesture. It’s rather dangerous. How many people find themselves plunged into a spiral of debt?

Some of the advice heard in the report is downright illegal, says Duff Conacher, co-founder of the Democracy Watch organization which campaigns for increased corporate and government accountability. In fact, the Banking Act states that it is prohibited to “take advantage of a person” and states that financial institutions must have a policy “to ensure that products […] are appropriate for the natural person to whom they are offered.”

If some customers see nothing but fire, others deplore the quality of services received in the branch and the staff turnover rate.

A resourceful retiree who I will call Léon for the sake of his relationship was stunned by the lack of proactivity at Desjardins to improve his wife’s situation. In February, he went with her to the credit union where he has been a lifelong customer because he had around $25,000 to deposit in his better half’s RRSP. This is how he understood that his wife’s mutual funds, totaling more than $150,000, had only returned 2% on average for five years and that the management fees amounted to 2.23%. . Of course, it is impossible to judge the returns obtained without knowing the investor’s profile, their investment horizon, their risk tolerance. Lark.

In reality, the numbers aren’t that important here. What Léon denounces above all is that he discovered the returns and fees because he asked questions. Otherwise, he would not have known anything, he assures us.

A good portion of the RRSP was ultimately used to purchase this GIC.

We cannot put all employees in the financial sector in the same basket. But Léon’s testimony is another illustration of the shocking and worrying gaps in the reporting of Marketplace.

Watch the CBC report (in English)

The veracity of the comments left on YouTube cannot be verified, but people presenting themselves as former bank employees confirm the conclusions of the investigation. One of them says that she was accused of having worked against the interests of the bank because she had suggested to a customer who was struggling to pay the minimum balance on his credit card to open a line credit with a lower rate.

“You will never get a promotion if you don’t sell enough,” sum up some employees in the sector.

The Canadian Bankers Association (CBA) responded to the report by saying that “the examples described do not reflect the experience that millions of Canadians have every day with employees of Canada’s banks.” But what does she do – concretely and diligently – to be so certain? Mystery.

Finance Minister Chrystia Freeland was no more reassuring. In addition to refusing to speak to the CBC, she fled and ignored her reporter Erica Johnson at an event. In a written statement, his office recalled that it had improved protection for consumers in the Banking Act. It was in 2022… Obviously, it is not foolproof.

Above all, we do not know how Ottawa ensures that its new measures are respected. We can write the most restrictive laws in the world, nothing will change if they are violated without consequence.

Seven years ago, Erica Johnson did exactly the same investigation. She is sorry that nothing has changed since then. But perhaps it is naive to believe that for-profit companies can put their customers’ interests ahead of their own. In this case, should bank financial advisors instead use the title “salespeople” and thus present themselves clearly?