It’s becoming increas—ingly important for financial advisors to have access to banking products in order to deepen relationships with clients and to keep them out of the clutches of Canada’s Big Five banks, say third-party providers of deposit and loan products.

“It’s a very important defensive strategy,” says Michel Bitar, vice president of partnerships at Montreal-based National Bank of Canada, which provides banking products to about 25 wealth-management and insurance companies on a third-party basis. “Banks are diversifying, and their cross-selling ability is definitely increasing.”

In recent years, several firms have developed robust bank or trust divisions to provide banking products to advisors. These include Manulife Bank, the veteran player in the group; Dundee Bank of Canada; National Bank; AGF Trust Co.; ICICI Bank Canada; B2B Trust; and MRS Trust Co.

“There was a time when advi-sors were really transaction-oriented,” says Mario Causarano, president and COO of Toronto-based AGF Trust, a subsidiary of AGF Management Ltd. “But they’ve come a long way, in terms of providing holistic advice. Advisors know that the more products and services they provide for clients, the better the relationship, the longer the relationship and the higher the retention value of those clients.”

Client retention in the face of stiff competition from the banks is very much on the mind of advisors and senior executives at wealth-management and insurance firms, Bitar says: “One thing I ask advisors is: ‘If you’re going to lose a client, do you really want to lose him because he went to the bank for a $5,000 RRSP loan? At least, lose him for something more serious than that’.”

Canadians increasingly appreciate the convenience and “one-stop shopping” appeal of consolidating their financial affairs -— investments, banking, mortgage, even insurance — with a single financial institution. Even those clients who prefer to deal with more than one firm aren’t likely to establish and maintain a relationship with more than two or three. “[That] becomes confusing for the client,” Bitar says. “The focus in the market today seems to be on facilitating, making everything more user-friendly for the client.”

Third-party providers such as National Bank — which provides banking products to advisors at Investors Group Inc. and Great-West Lifeco Inc. , both of Winnipeg, among others — go to great lengths to reassure their advisor partners that they won’t compete with them for their clients’ business.

“When we sign a contract, we have a very, very precise and detailed non-compete clause and non-solicitation clause,” Bitar says. “We’re not positioning ourselves in any way as a competitor. We do that once and that’s the last time we do it. No one will trust us anymore.”

Manulife Bank, the 14-year-old Schedule I bank subsidiary of insurance giant Manulife Financial Corp. of Toronto, has enjoyed success focusing both on providing banking products to the firm’s advisors and emphasizing the value of investment advice to clients.

“Our strategy is to provide banking products through financial advisors,” says Jane Strong, assistant vice president of product and marketing services at Manulife Bank. “If a client comes to us [directly] and likes one of our products, we try to refer him or her back to a financial advisor, because we feel it’s important that the client get advice on the whole financial picture.”

Manulife Bank’s lead product has been Manulife One, an all-in-one mortgage vehicle, but the bank also offers a variety of savings and chequing accounts, investment and RRSP loans, lines of credit and credit cards. Manulife Bank, which has no branches, employs banking consultants to deal with clients interested in mortgages.

National Bank is focused on building deeper relationships with its existing partners and finding new ones, Bitar says, and on marketing its services in tandem with its partners. With relatively little presence or brand recognition outside of its home province, National Bank is in a unique position to further its strategic goals as a company while providing its partners with banking products.

“Outside of Quebec, we’re not well known; we don’t have a bricks-and-mortar network,” he says. “So, there’s no cannibalization for us if we distribute through our partners. Whereas any other Canadian bank providing third-party banking would be competing with itself.”

Three-year-old Dundee Bank, which was bought by Bank of Nova Scotia from Toronto-based DundeeWealth Inc. in September, has made a name for itself by offering high-rate savings accounts, available to clients only through the advisor channel. Scotiabank has so far been guarded about its plans for Dundee Bank, but has said it intends to continue running its new acquisition as an advisor bank.

@page_break@“We plan to provide white-label banking services through Dundee,” says spokesperson Frank Switzer, who adds that Scotiabank is interested in learning more about the independent advisor channel through this acquisition.

AGF Trust, which offers investment loans as well as GICs to advisors, says that advisors have been asking the company for tax-efficient loan products that will allow them to offer clients ways to turn non-deductible debt into deductible debt. “We’re putting products together that will allow them to do that in the future,” says Causarano. The firm is also active in the mortgage lending market.

AGF Trust also intends to add to its lineup of deposit-side banking products in the new year. “It will bring a different value proposition to advisors,” he says, “and it will also be a source of liquidity [for mortgage lending] for us.”

ICICI Bank, a Schedule II bank subsidiary of Mumbai-based ICICI Bank Ltd. , currently offers a limited lineup of term deposits through the advisor channel but hopes to launch a more extensive suite of banking products in the future.

Is the advisor channel becoming saturated with competitors? Bitar believes that a natural barrier for entry is the cultural difference between advisors and bankers. You have to know how to deal with advisors. “We communicate,” he says. “Banking is a people business.” IE