This phenomenon, which has existed for a good number of years, seems to be opening up, according to the comments received by CP in February and March during the Pointage des courtiers québécois.
Some CPs deplore, among other things, the increase in competition from the various internal networks of their financial institution, the revisions to the decrease of their compensation and the change of course in the direction of their broker’s business . It is feared that senior management wants to favor branches where employees work at the expense of investment advisers whose remuneration is variable and, at times, higher than that of employees.
“The bank imposes its stranglehold. The culture that comes from above is gradually changing. Banks and advisers do not have the same priorities. There is a bit of a clash going on”, summarizes an adviser.
Banking raises many doubts. Some advisors question the role of their distribution network in their financial institution. In the future will it receive its fair share of the technology investments needed to stay relevant and grow? Will referrals from bank branches or credit unions decrease?
Some people wonder what role the salary advisors they work with will have in their relationship in the future. For example, these advisors may, depending on the business model, serve clients with accounts under $100,000. However, depending on the company, these salary advisors often remain indirectly at the service of the CPs. The latter can thus segment their clientele, then dispose of the smallest accounts by transferring them to them.
The misfortune of some…
Banking is one of the factors that favored the expansion of Raymond James (RJ) in Canada. In a sector where competition is strong for the recruitment of CP, the independent company has acquired 130 CP teams in Canada for three years, said Richard Rousseau, vice-president of the management board of the private group, Quebec, in RJ, in April last. Explain the rationale of bankerization.
“A private banker that works as an employee for the institution, with specific products to sell, from the point of view of the shareholders and managers of the institution, is a much more profitable and safer business “. The relationship with the client belongs to the institution and the employee, if he does not do what the institution wants, he can be replaced,” he said.
Also, the Private Bank is usually paid less than what a CP earns. “The goal of the big institutions would be that the advisers are all private bankers, who work for the institution and who are paid half of what investment advisers currently earn,” according to Richard Rousseau.
“This is a real and persistent phenomenon that is accelerating over time,” Richard Rousseau also noted. The stake is too high when it comes to the profitability of wealth management operations and the security of these businesses. The councilors are alone in this and no one represents them.”
One of the problems with banking is that you risk undermining the independence of the board to choose the best product for the client. For a financial institution that is also a manufacturer of financial products, the temptation would be strong to drive more customers towards in-house products that are more profitable to distribute.
“If there are conflicts of interest that are created for this, it might not be good for the client,” judged Richard Rousseau.
Since financial institutions do not want a massive departure of advisers, who leave the bank with a large part of their clientele, adjusting their policies slowly but surely, according to him. However, teams of dissatisfied advisers make the jump to RJ, including some of Desjardins Securities, which underwent a reorganization in the fall of 2019.
“For a firm like us, this is a major competitive advantage. Banking is happening in the United States as much as it is in Canada,” said Richard Rousseau. In particular, he assures the CPs that, when one of them leaves RJ, there is no attempt to assign his clients to another CP to keep his accounts. “We have a respectful business relationship with the CPs, because these people work for their clients, not for RJ,” maintains Richard Rousseau.
Paul Balthazard, vice president and regional director, Quebec, at RBC Dominion Securities (RBC DVM), noted last April that his boss, David Agnew, was being asked more questions about banking: “Our people have friends in other companies and, to varying degrees, this happens elsewhere. In the large companies that are banks, there is more and more of this banking presence in their daily life, both in the ways of doing things and in the management .
“David Agnew is candid about this issue. He says: “It’s going to happen if we’re not as profitable as we are now. “We are still committed to continuing our growth and maintaining this profitability,” explained Paul Balthazard.
According to him, the current model of RBC DS serves its owner well, but the management of the broker must be flexible and open to the evolution of the industry. However, as long as the performance is there, there is no reason for the RBC to interfere in the daily life of the broker.
It is therefore difficult to know how banking will evolve precisely in the brokers that are the property of financial institutions. However, a low profitability of one of these could encourage the top management of a bank to increase its control.
At the National Bank Financial (NBF), there is no fear of banking, said Denis Gauthier, its first vice president and national director, in April.
In 2009, the arrival of the National Bank’s Private Wealth 1859 brought its share of questions, as well as dissatisfaction among the PNs. However, things seem to have changed since then, according to Denis Gauthier: “The model of advisers who do wealth management and who bill their services on the fee, for the most part, is a model with which we are comfortable. . Keep the interests of the client, the board and the shareholder in balance.”
The FBN is however aware of the phenomenon, according to him: “The reflection, we had. As we can see, there are emerging wage models. That’s not our game plan at all.”