Canadian regulators warn of high-pressure sales tactics at Canada’s big banks
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Diverging Reports Breakdown
Canadian regulators warn of high-pressure sales tactics at Canada’s big banks
Canadian securities regulators are raising serious concerns about aggressive sales tactics inside the country’s largest banks. A new report from the Ontario Securities Commission (OSC) and the Canadian Investment Regulatory Organization (CIRO) reveals that many mutual fund dealing representatives at the bank branches are under pressure to prioritize sales. One-third of the representatives polled also note that at least “sometimes,” clients have been given incorrect information about the products or services being recommended to them. 32 per cent of representatives agree that the way they’re compensated puts more value on sales volume than the quality of advice given to clients.
Canadian securities regulators are raising serious concerns about aggressive sales tactics inside the country’s largest banks.
A new report from the Ontario Securities Commission (OSC) and the Canadian Investment Regulatory Organization (CIRO) reveals that many mutual fund dealing representatives at the bank branches are under pressure to prioritize sales, with some admitting they have recommended products that may not be suitable for clients.
The findings suggest that investors may not be receiving advice that truly reflects their financial needs.
“While it’s clear that many bank representatives are prioritizing quality advice, it is also clear that sales pressures and incentivization may be driving concerning behaviours,” said Grant Vingoe, CEO of the OSC, in a statement.
“The focus of the bank representatives should be the best interests of their customers and clients — not feeling heightened pressures to meet sales targets.”
The survey reveals that 32 per cent of representatives agree that the way they’re compensated puts more value on sales volume than the quality of advice given to clients.
“We pay lip service to financial planning,” said one anonymous mutual fund representative in the survey. “Someone who sells a huge mutual fund is viewed more favourably than someone who ran a complex financial plan and helped the client but in a more modest, financially ethical and healthy way. This needs to change.”
Jason Pereira, senior partner and financial planner at Woodgate Financial, says Canadians should be aware that banks have no obligation to work in their best interests. Mutual fund dealing representatives don’t have fiduciary responsibility, which is a legal and ethical requirement to prioritize clients’ interests above their own or their institutions. Instead, they have a suitability responsibility, which means a product has to be suitable for a situation.
“That doesn’t mean they won’t recommend something that isn’t a conflict of interest,” he said.
More than half of representatives (56 per cent) say that scorecards — a means of tracking performance against target measures — add significant pressure on them to increase sales, while 58 per cent agree that scorecards draw attention to the individual representatives who are not hitting sales or other targets.
Twenty-five per cent of representatives say that clients have, at least “sometimes,” been recommended products or services that are not in their interests.
“I feel more like a salesperson than an investment advisor,” one representative said.
One-third of the representatives polled also note that at least “sometimes,” clients have been given incorrect information about the products or services being recommended to them.