On March 20th, the FCAC released a report that criticized banks for having a corporate culture too focused on selling products and services. The same report said that banks don’t have enough controls in place to protect the public from pushy sales practices.
And we know that these sales practices exist, since CBC reports that came out last year showed how banks lean on staff to meet sales targets. Employees reported raising credit limits without authorization and investing their funds in unsuitable mutual funds. However, the FCAC report didn’t say that it had found any widespread examples of unsuitable products being sold to customers.
This means the Big Six are more like financial retail outlets than traditional banks. For example, while bank staff are mostly salaried, they receive variable pay based on how many financial services they sign people up for. For managers, the payoff is even greater.
How did this happen? Technology allowed banks to shift away from traditional services like processing payments and handling transactions and selling more services and products. And they do make money selling things like mortgages, lines of credit, investments and new accounts.
More people are starting to understand that banks aren’t there for the benefit of the customer but for their own profit. These are the people who shop around for a mortgage in Fort McMurray or talk to a Fort McMurray mortgage broker instead of assuming that their bank will offer them the best rate. Yet the majority still assumes that the bank is as loyal to them as they are to it. The reason your Fort McMurray Mortgage Broker can get better rates at the same bank you bank with is due to the volume we submit and the other lenders we have access to causes the bank to offer the best mortgage rate in Fort McMurray upfront.
The FCAC report had several recommendations to protect the public. One was improving the oversight of customer complaints. Another was tying employee incentives to metrics that reflected customers’ best interests, not sales quotas. The FCAC recommended that banks prioritize customer protection and fairness. Unfortunately, that’s only half of the problem. The other half is the public’s general lack of financial literacy.
What should the public know that it doesn’t already?
- Banks sell financial products, and they are not neutral financial advisors.
Banks may sell you products you don’t need or are not suitable to you.
- Banks work for their shareholders, not their customers.
- They may charge a higher interest rate than you could get elsewhere, and they don’t have to tell you this. A Fort McMurray mortgage broker could find you a loan with better terms or a lower interest rate.
- Credit cards are some of the most heavily marketed products on the planet, and loyalty programs are as tailored and tweaked as any other marketed product.
Why don’t more people know this? Well, part of it is the fact that banks help contribute to financial literacy programs. It becomes a way to market to the public and make themselves look good, the same way fast food companies may promote how much of their product you can eat in moderation as part of a “healthy” diet.