Why planners love those banks

“They’re our best ally,” laughs one FundEX Investments Inc. advisor in Ontario. “They treat their customers horribly.” Adds an Ontario colleague: “They’re so bad they’re actually helping.”
In fact, planners from every firm surveyed say not only are they confident about keeping their clients away from the banks, they regularly get new business from bank customers unhappy with the advice and service they have received.

Planners may be confident of their status with existing clients, but the banks say things are about to change. The Canadian Bankers Association says the six largest banks (CIBC, Royal Bank of Canada, Bank of Nova Scotia, Bank of Montreal, TD Canada Trust and National Bank of Canada) are gaining strength in the financial planning field. Royal Bank has pulled together a group of 1,500 financial planners under the RBC Investments banner. BMO is positioning BMO Harris Bank as its wealth-management and planning division.

Overall, the six banks pulled in 51% of their income in 1999 from sources such as mutual funds, investment management, insurance and trust services. Growth in the wealth-management businesses and securities helped the banks earn $9.1 billion in net income globally, 51% of it within Canada.

Opportunity for bank planners is absolutely huge, especially now with the markets as volatile as they are, says David Jenkins, managing director of ScotiaMcLeod Inc.’s financial planning division.

“There are advantages in building off an overall large organization such as Scotiabank. We’re not setting up shop in a small town with the possibility of packing it in within six months. We have the service and the strength for long-term individual service, and the public recognizes that,” he says.

Many of the planners polled by IE cited poor customer service at the banks as the top reason clients move business over to them. The criticism has not escaped the attention of the banks. “We always hope that poor customer service is in the past, but it’s something we continue to improve on,” says Jenkins.

Bank of Nova Scotia currently has almost 400 planners and is recruiting from other financial planning pools. CIBC currently has 1,200 advisors licensed to sell both proprietary products and third-party products. Of those, 600 hold a certified financial planner designation, but in the near future it will become mandatory for all CIBC planners to have a CFP.

While banks are firming up planning services, the financial planning firms are beginning to offer banking services. The competition may heat things up a bit, but it’s far from being considered a threat to the banks, says Steve McNair, head of CIBC Imperial Service in Toronto.

“Fundamentally, a bank is best-positioned to provide banking services — it’s part of our DNA,” he says. “A lot of those other organizations will have to subcontract to provide those services.”

Some of “those other organizations” are subcontracting in a way, but don’t seem all that concerned about it. In fact, with their existing networks of confident-sounding planners and an established customer service edge, planning firm executives sound excited by the existing and new alliances.

The creative variations range between partnerships with a single banking institution to creating a portfolio of institutions to offer services. Some firms even suggest manufacturing their own banking product is a possibility.

Last fall, Assante Capital Management Ltd. partnered with National Bank of Canada to release its initial banking product line, which includes RRSP loans, lines of credit, GICs and a gold MasterCard.

Adam Dooley, Winnipeg-based communications specialist for Assante, says the launch was extremely successful.

“It’s not an insignificant venture,” he says. “It’s one we’re treating very seriously.” The ultimate goal, he says, is to make it possible for clients to delegate their financial affairs to a single advisor.

IPC Financial Network Inc.’s banking venture, called IPC Save Inc., has a portfolio of products and services offered by or in partnership with several banking institutions, including Sun Life Financial Services of Canada Inc., BMO and MBNA Canada Bank.

In some cases the firm acts as a broker, and in other cases products are co-branded with the partner institution. Sam Febbraro, president of IPC Save, says his strategy is to shop the market to provide the service. IPC is a full GIC and mortgage broker. Its list of banking services includes loans, lines of credit and credit cards, as well as chequing and savings accounts, and cash-management accounts.

Investors Group Inc. is also interested in giving planners the banking capability option. It signed a letter of intent “which contemplates a long-term distribution agreement with CIBC.”

On the manufacturing side, Manulife Financial Corp. has its own fully operational bank, and heavily markets banking services through the Manulife advisor network. The company created a chartered bank in 1993, following the purchase of several small trust companies.

At Dundee Private Investors Inc., there are plans afoot to follow suit. The goal is “to provide our own service rather than just be a distribution network,” says Don Charter, chairman and CEO of Dundee Securities Corp., Dundee Private Investors Inc. and executive vice president of Dundee Wealth Management Inc. The company has an application pending regulatory approval.
Having the services is beneficial on several levels, and the intent to get into banking or expand existing offerings is indicative of a shift in the industry. Just as they did with insurance, more planning firms are offering bank services in the interest of complete financial planning and one-stop shopping to retain clients. But also, especially as firms better realize the power of their huge distribution networks, more services are likely to be in the best interests of the company bottom line.

Whatever the motivation, planning firms are well-positioned to keep up with, and perhaps are ahead of, the competition. IE