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Spotlight: Do big banks make money for you, or just themselves?

If you’re concerned that your bank is not giving you value for money, is there anything you can do about it?

From high fees to investment products you don’t need or that won’t deliver what they promise, Canadians are beginning to question the value for money they get from their bank.

A number of high profile investigations and news stories have encouraged formerly loyal customers of Canada’s big five banks to reconsider whether their bank has their best interests at heart. Many are actively looking for other options.

Banks’ high pressure sales methods exposed

Earlier this year, a CBC Go Public investigation exposed how employees of Canada’s big banks were being pressured “to upsell, trick and even lie to customers to meet unrealistic sales targets and keep their jobs.”

The investigation sifted through nearly 1,000 emails from Royal Bank of Canada (RBC), Toronto-Dominion Bank (TD Bank), Scotiabank, Canadian Imperial Bank of Commerce (CIBC) and Bank of Montreal (BMO) employees. You can read the full story here.

Here are a few quotes from the employees who contacted the investigation:

  • "They [management] want you to hit your numbers and it doesn't matter how."
  • "It's not what's important to our clients anymore. The bank wants more and more money.”

  • "We are straight up told to tell false stories (lie) to sell products."

A theme of the investigation was the high-pressure sales tactics employees were being asked to use. However, when asked to comment on the investigation, the banks issued statements that did not address this concern.

Beware impressive job titles

In one Go Public story, a man trusted his life savings to a “vice president” who told him he could look forward to "about six per cent in annual interest" through various mutual funds. In fact, he earned less than half that in interest, and paid over $30,000 in fees over six years.

The “vice president” turned out to be a salesperson, like most of the 120,000 registered financial professionals in Canada. According to the Small Investor Protection Association, only 4,000 of these are legally obliged to act in the best interests of their clients.

Then there are the bank fees

Checked your bank statement lately? Over the last year or so, big banks have been busy hiking fees for everything from daily chequing accounts to credit cards. And many people who invest through banks are paying more in fees than they should.

In the last few years, BMO, CIBC, TD Bank and others have all sought settlements with regulators after discovering customers paid more in fees than they should.

In October, 2016, CIBC agreed to pay investment clients over $73 million to reimburse them for excess fees. Some clients had been over-paying for 10 years. In November, 2014 TD agreed to pay $13.5 million after thousands of client accounts were charged too much in investment fees.

Security can be a worry, too. In March, 2017, 44,000 Torontonians were charged a total of $87 million extra in property tax after a file transfer protocol error by RBC.

As stories like these appear with increasing regularity, many people now see banks as catering to the affluent baby boomer first and foremost—more concerned about profits and shareholders than customers.

The ultimate irony is that some banks’ shareholders are other banks.

Time to choose a different approach?

Is it time for Canadians to rethink where they go for their banking services and stop giving banks their money?

There are alternatives. Investors, for example, can use online robo-advisor services that let you manage your finances without an adviser. When it comes to everyday banking services, credit unions are growing in popularity.

Credit unions can earn more for their customers, because their customers are more than customers; they’re also members. They are member-owned and not-for-profit, offering lower fees and often higher savings rates.

Not-for-profit doesn’t mean credit unions don’t make money. They offer the same services as banks, but instead of focusing on the needs of baby boomers and their own bottom-line, they cater to their local communities and members.

In Canada, credit unions have combined assets of over $350 billion and more than 10 million members spread across a network of over 600 credit unions. There are over 70 in Ontario alone.

For many Canadians disillusioned with banks, credit unions show there is another way.