Key Takeaways
- Canada’s big banks are being criticized for prioritizing profits over clients’ financial security
- A regulatory review found that 25% of mutual fund dealers reported recommending products or services that were not in their clients’ interests at least "sometimes"
- The Canadian Association of Retired Persons (CARP) is calling on banks to adopt a higher fiduciary duty standard for financial advisers and increase internal accountability for sales practices
- The banks’ industry trade group, the Canadian Bankers Association (CBA), claims that banks take the survey’s feedback seriously, but CARP says the response is unsatisfactory
- The next phase of the regulatory review is ongoing, and the regulators will consider further action to ensure compliance with securities laws
Introduction to the Issue
The Royal Bank of Canada, Toronto-Dominion Bank, and Bank of Montreal are among the big banks in Canada’s financial district in Toronto. However, these banks are facing criticism for their sales practices, with the head of the Canadian Association of Retired Persons (CARP) stating that they are "not interested" in putting clients’ financial security ahead of profits. Anthony Quinn, the chief executive of CARP, is calling out the banks for inaction following a regulatory review of the sales culture and environment within five bank-affiliated mutual fund dealers in Ontario.
The Regulatory Review
The review was conducted by the Ontario Securities Commission (OSC) and the Canadian Investment Regulatory Organization (CIRO) and was prompted by a 2024 CBC Marketplace investigation into the "enormous sales pressure" bank branch financial advisers face. The review found that 25% of mutual fund dealers reported recommending products or services that were not in their clients’ interests at least "sometimes." The regulators also noted that the use of scorecards to set targets and measure performance metrics may influence the job behaviors of financial advisers, posing risks that Canadian retail investors’ interests are not being sufficiently prioritized.
CARP’s Response
Quinn shared the CBA’s reply on CARP’s website, stating that the indication was that the status quo was satisfactory to the banks. CARP is calling on banks to voluntarily make changes, including adopting a higher fiduciary duty standard for financial advisers, allowing branch-level employees to offer non-bank-affiliated investment products, and increasing internal accountability for sales practices. Quinn believes that receiving sound financial advice is important for both seniors and younger people, and that the imperative of every adviser should be to have the best possible outcomes for their clients.
The CBA’s Response
The CBA, which represents more than 60 domestic and foreign banks operating in Canada, claims that banks take the survey’s feedback seriously. However, the organization’s response was deemed unsatisfactory by CARP, with Quinn stating that the letter indicated that the status quo was satisfactory to the banks. The CBA highlights its financial literacy resources and senior-focused policies, services, and products offered by Canadian banks, but CARP believes that more needs to be done to address the systemic failures that disproportionately harm older Canadians.
Next Steps
The next phase of the OSC and CIRO’s review is ongoing, and the regulators will consider further action to ensure compliance with securities laws. Quinn said that CARP will continue to work with the CBA and encourage banks to see the issues raised in the report from their customers’ point of view. The institutions are doing very well, but CARP is looking for them to see it from the investors’ side. The organization will continue to push for changes to ensure that the best interests of clients are prioritized, rather than the profits of the banks.
Conclusion
In conclusion, the big banks in Canada are facing criticism for their sales practices, with CARP calling on them to adopt a higher fiduciary duty standard for financial advisers and increase internal accountability for sales practices. The regulatory review found that 25% of mutual fund dealers reported recommending products or services that were not in their clients’ interests at least "sometimes." The CBA claims that banks take the survey’s feedback seriously, but CARP believes that more needs to be done to address the systemic failures that disproportionately harm older Canadians. The next phase of the review is ongoing, and the regulators will consider further action to ensure compliance with securities laws.