Facebook logo- that acts as a link to our facebook profile 
Youtube Logo - that links this webpage to our youtube 
account
Client Login

Our best practices

Big banks are limiting advisor and client options by only selling in-house products

September 15, 2021

Primary

The big banks’ move to limit the products that their financial advisors can sell to only those available in-house is a big mistake, Grant White, Portfolio Manager of Endeavour Wealth Management at IA Private Wealth in Winnipeg told Wealth Professional.

He was reacting to recent publicity that RBC, TD, and CIBC will no longer sell third-party mutual funds for any investment portfolios. But, he added that  Manitoba’s credit unions have also started limiting their product shelves, although they still offer a few mutual funds.

“I know this has a lot to do with the product mandates that are coming in toward the end of the year,” said White, who used to work for National Bank Financial. “So, from a regulatory side of things, I think they’re using it as an opportunity to say, ‘we want to reduce the liability associated with ‘know your products’ coming into place’.

“My take is that it’s a really interesting move from companies that are already selling a lot of in-house product at the branch levels. Now it’s requiring their in-branch people to only use their internal proprietary products. My question is: if the concern is really about the clients, then why not focus more on training your advisors to be able to assess other products out there so you can ensure the clients are getting the best product solutions possible?”

White questioned whether this move is in the clients’ best interest, even though it’s being positioned as a way to simplify the product range and provide more focused advice through a deeper knowledge of internal investment products.

“If you’re using an emerging market ETF that’s only an internal product, how can you ensure that’s the lowest cost ETF structure for an emerging market ETF? You really can’t because it’s the only one you have access to. So, I just think, at the end of the day, it’s an interesting move under the guise of being beneficial to the client, but it doesn’t make a lot of sense from that perspective.”

White is concerned that most Canadians get their financial advice from their local bank branches and trust that they’ll be taken care of. While he said they largely are, the options they get there “might be all vanilla”.

“But, when moves like this happen, I think it’s a slippery slope because now you’re eliminating options, and that’s something that the clients aren’t really aware of. They’re not qualified to make those decisions on their own, but their advisors should be. So, you’re eliminating all these options that are beneficial or potentially beneficial for the client in an effort, I dare say, to sell more in-house products, more proprietary products.”

“I have a hard time finding where that’s beneficial and in the best interest of the client,” he added, “which is what we should all be striving for in this industry. So, yeah, I have a lot of questions about the motives behind this.”

White is also concerned that this will create more challenges for bank advisors who prided themselves on providing third party, unbiased advice, since he estimates that it narrows what they can offer to about 10% of available product. While RBC and TD have some broad mutual fund options, he noted that it cuts out companies like Fidelity or the “Dynamics of the world”, so that may cause more advisors to exit the banks so they can continue to give their clients unbiased advice.

“You’re cutting out a huge amount of mutual fund options that are available in ETF options now,” he said.  “As advisors, especially those that really prided themselves on delivering the advice that’s in the best interest of the client, I think they’ll have a hard time saying that as easily going forward if they’re at one of these firms because how can you ensure that it’s the best advice when you simply don’t have those options available to you. You’re not going to be doing all the research because you can’t use it, anyway. So, this is incredibly limiting for an advisor because how can you say it’s the best advice for your clients if it’s really the only advice that you can provide to your clients?”  

“Certainly, in my mind,” said White, “it’s not in the best interest of the client, and I don’t think it’s a direction that we should be going in as an industry overall.”

Reference Link: https://www.wealthprofessional.ca/news/industry-news/big-banks-are-limiting-advisor-and-client-options-by-only-selling-in-house-products/359807

Recent ArticlesView All >

Why our industry is failing the next generation of advisors

Current failure rate is unacceptable and that’s on all of us, says portfolio manager

June 16, 2021

5-Star Advisors and Top Teams 2021

Wealth Professional strives to recognize the best in the wealth management industry

June 15, 2021

How do you plan to lead your team out of the pandemic?

Now is the time to start looking at what the next phase looks like, says advisor

April 30, 2021

Get in contact with us

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.