Planners and advisors working within the branches of Canada’s Big Six banks are generally satisfied with their ability to choose investments for clients — even though they are restricted to selling only their banks’ in-house, proprietary products. Royal Bank of Canada (RBC), Toronto-Dominion Bank (TD) and Canadian Imperial Bank of Commerce (CIBC) adopted that restrictive policy in 2021, matching the long-held practices of the other three institutions.
At RBC, where branch planners and advisors work within RBC Financial Planning, one advisor in British Columbia said, “Within our in-house product [lineup], I still have access to a wide range of options and can customize solutions to meet a variety of client needs.”
That advisor also found they could easily connect clients with the bank’s brokerage arm, RBC Dominion Securities, or with the bank’s self-directed division for any services that “may be outside of [my] scope, if that is in the best interest of our clients.”
A TD, where planners and advisors work under TD Wealth Financial Planning, an advisor in Ontario said, “We don’t have the freedom to make objective product choices because we cannot offer products outside of TD.” However, they added, “I’m OK with this as it simplifies my job,” and they said the bank’s job is to make sure its products perform well for clients.
A CIBC advisor in Ontario, working with CIBC Imperial Service, said they were initially “a bit disappointed with the change to closed shelf [beginning in 2021],” but that they understood how product regulations had shifted. “We are fortunate to have a large in-house shelf of products.”
In this year’s Report Card on Banks, all three of the banks that added the restriction in 2021 received relatively consistent ratings by advisors for the “quality of bank’s product shelf.” For “freedom to make product choices,” CIBC and RBC were each rated 9.1 out of 10 in 2024 (similar to 9.3 and 9.2, respectively, in 2023), while TD was rated 7.5 (a significant improvement, by half a point or more, over 6.9 a year ago).
Leaders with all three of these banks said there are no plans to expand branch advisors’ product-shelf access — a policy that was also confirmed by executives with Bank of Montreal, Bank of Nova Scotia and National Bank of Canada. Clients can transfer in third-party products, but branch advisors are unable to add to those positions and must coordinate with other bank divisions (such as the investment brokerage arms) if clients request products the advisor is not permitted to sell.
Rory Mitz, senior vice-president and head of CIBC Imperial Service, said CIBC advisors have a “highly competitive investment shelf,” which includes more than 150 proprietary managed products that incorporate access to both in-house and external managers.
“We continue to review our product shelf, [and] we’re feeling quite good about the solutions and the options that we have,” said Michael Walker, vice-president and head of mutual funds distribution and RBC Financial Planning.
TD stated in an emailed response that clients are served in the appropriate channel based on their specific needs. The bank is backed by TD Asset Management, the statement said, and it’s confident in that asset manager’s investment processes.
This may all be unwelcome news for investor advocates and some financial services industry regulators. In March, in response to the Department of Finance Canada’s December 2023 consultation on Strengthening Competition in the Financial Sector, organizations such as FAIR Canada continued to push against big banks’ domination of the mutual fund market. The consultation asked whether Finance should require or incentivize large banks to offer third-party products, and FAIR Canada said in its submission that doing so would “improve competition and better serve consumers.”
The Ontario Securities Commission (OSC), in its strategic plan for 2024–2030, released in May, said helping individual investors will involve efforts to “build upon progress made through the client-focused reforms, with regard to access to products, conflicts of interest, effective disclosure, education, and opportunities for redress when the expected standards of conduct are not observed.”
In particular, said the OSC, “Where registrants are not providing the breadth of advice and products their clients would expect from an advisor, we will call this out for what it is — sales activities by sales representatives driven by broker compensation. This is the case even if minimum regulatory expectations are met.”
When asked about the 2023 consultation, a Department of Finance official said in August that the feedback from Canadians and financial stakeholders was still being reviewed. Its more recent consultation, released on Aug. 12, doesn’t directly address big banks’ product shelves.
What branch advisors think
Whatever the outcome, product-shelf restrictions by banks don’t seem to bother branch advisors much. Across the Big Six, the banks were collectively rated 8.4 for performance for both product quality and product freedom. That was lower than 8.7 and 8.6, respectively, in 2023, but neither rating dropped significantly. Both categories remained among the 10 areas rated most highly for average performance.
What’s more, some advisor comments raised questions about the way advisors define “freedom,” and whether they even desired more.
One branch planner in Ontario with BMO said, “We can play with whatever is in the sandbox, but the sandbox is only as big as it is,” yet also said that BMO advisors can choose “whatever we like, as long as it’s the right thing for the client.” (BMO advisors rated their bank 8.8 for product quality and 9.1 for shelf freedom, up from 8.7 and 8.9 a year ago.)
Having greater choice could even be problematic for some advisors, given current product restrictions and the size of the investment market.
Said one advisor in Ontario with Bank of Nova Scotia (BNS), “We already have a robust product shelf with solutions for essentially each and every client. All the banks offer similar products, so I really don’t see a need to have more selection at our disposal. This would only be more time-consuming and potentially paralyzing for many advisors, as there are literally thousands of mutual funds and ETFs to select from.
“The most important thing is understanding our clients’ needs, goals and objectives,” the BNS advisor added. “Unless you are an investment advisor or portfolio manager building out very specific asset-allocation models, more selection is just unnecessary.” (BNS was rated 7.7 and 7.8 for its product quality and shelf freedom, respectively, down from 8.6 and 8.9 in 2023.)
Allocation of client assets
Planners and advisors interviewed for the 2024 Report Card on Banks reported (as of Dec. 31, 2023) that:
- one-third (33.9%) of their clients’ assets under management were invested in proprietary managed portfolios from their banks, compared with only 1.4% invested in third-party managed portfolios that clients would have bought prior to 2021 or transferred in;
- slightly more than one-third of clients’ assets (35.1%) were in mutual funds offered by their banks; and
- a significant portion of the remaining assets (21.6%) were in GICs.
That allocation mix marked a shift toward in-house portfolios compared with the 2023 Report Card (for which data was reported as of Dec. 31, 2022). In last year’s report:
- proprietary managed portfolios held only 22.7% of clients’ assets, while the share of clients’ assets invested in third-party managed portfolios was the same, at 1.4%;
- banks’ mutual funds accounted for 50.8%; and
- the share held in GICs in 2023 was lower, at 19.4%.