by Tom Bradley

It’s a fine line. Is your bank or investment representative serving you or selling you?

All of us who work in financial services walk that line. Certainly, Steadyhand is hyper-focused on client outcomes and wants to grow, so our team must find a balance.

At the mega, multi-product banks, however, it feels like the balance has been lost. In 2016, Wells Fargo was called out for illegal sales practices (previously the bank was considered a world leader at cross-selling). In 2017, CBC exposed TD Bank (and subsequently the other Canadian banks) for cross-selling services too aggressively (would you like fries with that?), sometimes to the detriment of the customer.

With this backdrop in mind, I recently read with amusement an article in the Wall Street Journal about Bank of America changing the compensation scheme for its 17,000 Merrill Lynch advisors. The percentage of revenue that advisors keep will be decreased unless they hit certain sales targets. As the article says, "The plan, which is also a response to a tougher competitive environment, is meant to juice brokers’ assets, swell bank deposits and funnel more clients into retail-bank products such as mortgages and credit cards."

And here’s the clincher. The head of Merrill Lynch Wealth Management, Andy Sieg, said the program "is having the desired impact. Advisors are prioritizing client acquisition" and "making referrals to the broader Bank of America at higher levels than ever before."

Hmmm ... "prioritizing client acquisition." Where does advice and client service fit in?

In Canada, we don’t have nearly the competition in financial services as they do in the U.S. Our Big 5 banks operate a cozy and obscenely profitable oligopoly. But from our research (including interviewing job candidates) it appears our banks are just as aggressive at prioritizing sales. Indeed, most bank employee bonuses and career paths are tightly linked to sales quotas.

If you’re being sold an additional service by your bank, before committing you should ask your representative to put his/her ‘service’ hat on and tell you why a fee-based investment account, new credit card or investment loan, or larger credit line and home-equity loan make sense for you.