Banks want more of plannng pie

But rather than aggressively challenge each other or independent financial planning firms, many banks and credit unions are focusing resources on existing clients.
“The routine banking business already comes in the door,” says Investor Economics. “The challenge is to keep those people happy and win more of their business, developing long-term relationships. Essentially, the deposit-takers are on defence, while their competitors play offence.”

Matt Varey, senior vice president of RBC Financial Planning in Toronto, admits the banks have been playing a game of catch-up: “The banks have evolved, at different levels, into financial planning over the past several years. It is clearly a need that our clients would like us to provide.”

RBC Financial Group has developed the industry’s largest financial planning force, which actually represents the consolidation of two financial planning advisory groups within the bank. In response to customer demand, Varey says, the bank has concentrated on the accreditation of its staff and currently has more than 1,600 financial planners who carry the personal financial planner designation granted by the Institute of Canadian Bankers. Of those, 244 also carry the certified financial planner designation.

Varey says the bank’s priority is to serve the credit and investment needs of its 360,000 financial planning clients (out of a possible 10 million retail customers). And, he says, clients have responded positively: “Clients are saying, consistently, that they want the majority of their needs delivered under one roof. They want it to be done seamlessly and they want answers that are as simple as possible.”

CIBC is taking a slightly different tack. It has 1,200 financial advisors, most of whom carry the PFP designation, but 600 are CFPs and the other 600 should complete their exams within a year. “We have looked at that level of designation as the appropriate one, whereas a number of competitors have the PFP, which is below the CFP,” says Steve McNair, Toronto-based head of CIBC Imperial Service, the bank’s financial planning arm.

For more than five years, CIBC has concentrated on developing a network of planners who are dual-licensed and sell both in-house and third-party products. “Research told us clients wanted objective advice. By licensing our advisors to do those things, they can provide oversight and meet clients’ needs. No other bank has gone down that road,” McNair says. Other institutions use a specialist to handle third-party sales. “It will take them a few years to catch up, in our view.”

But it goes beyond products, says McNair. Imperial Service advisors also offer borrowing and cash-management services. “It’s a comprehensive approach. We all know that is becoming a more important solution for our clients.”

He can point to concrete results. For instance, fee-based products, including its own Managed Portfolio Services, tripled in volume in the past fiscal year. CIBC also expects to consolidate $500 million in assets from other providers by the end of this fiscal year. “Because the advisors are positioned as objective, the relationships are growing closer. This bodes well for this year and future years,” says McNair.

Competitors, too, are putting the emphasis on relationship-building. “Bank of Montreal is very committed to creating appropriate solutions to guide clients,” says Kris Vikmanis, head of professional development and service quality at BMO Private Client Group in Toronto. “In order to provide integrated solutions, you have to move to the next step of really finding out what it is the client hopes to achieve over a long period.”

The bank differentiates itself, she says, through its internal processes and software planning tools geared toward providing an ongoing road map for clients. “The tools that support the process are modular. That means we can go at a pace appropriate to the client,” she says.

There are 800 investment advisors working within BMO’s 920-branch network. Of this number, 600 bank employees are “investment fund specialists,” trained to sell mutual funds. They have also taken additional courses at the bank’s Institute for Learning. The other 200 are “resident investment advisors” from BMO Nesbitt Burns Inc. who work at the branch level.
Through discussion of issues that concern a client, she adds, the advisor can develop a stronger relationship. “That’s certainly a key strategy for client retention. And, if we do our job properly, it should also lead to a greater share of current and potential business,” says Vikmanis.

While the banks have become a formidable force in financial planning, they are not a major threat to the credit union movement. “We are not competing at the same level [as the banks] because we don’t have the same clientele,” says Trish Collins, Vancouver-based manager of financial planning at Vancouver City Savings Credit Union, the largest credit union in the country.
“Generally speaking, we are not dealing with very high net-worth clients,” says Collins, adding that VanCity’s chief competitors are smaller credit unions. Typically, a client is a working person in his or her 50s who is concerned about retirement planning.

Clients, who are members of the credit union, pay fees ranging from $500 to $1,500 for a detailed financial plan. Collins heads a team of six financial planners at VanCity’s head office who work in tandem with 15 “investment and retirement advisors.” The IRAs provide solutions to the 125 “financial services advisors” at the credit union’s 41 branches.

VanCity is also competing with independent fee-only financial planners, says Collins: “But we have a very friendly relationship with them. If there are situations that are beyond us, we will refer clients to a fee-only planner.”

At the branch level, she says, competition is stiff and FSAs (who sell investment products) must be up to speed. “We try to ensure the client is served, no matter what the dilemma, and by making the correct referral to specialists and following through,” says Collins. IE