Banks are in the business of staying profitable. And while there’s nothing wrong with that, the way they sell financial products and manage employee performance can lead to sales cultures that are misaligned with consumer interests, according to a new report from the Financial Consumer Agency of Canada (FCAC).
The agency sifted through 4,500 complaints related to sales practices involving Canada’s six largest banks—Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, and Toronto-Dominion Bank.
The FCAC also reviewed 100,000 pages of documents (including those about how banks handle training, performance, and self-policing), and interviewed more than 600 bank employees.
Here are some of the major takeaways from the report:
1. Sales interests often take precedence over customers’ interests.
This is a growing risk because processing transactions and customer requests are an ever-shrinking part of the job of working at a bank branch. With customers increasingly doing their routine business via online banking, apps, and ATMs, branches have been turned into “stores” dedicated to providing advice and selling products, the FCAC said.
“Today, most branch employees are either directly involved in selling financial products and services to consumers or have a responsibility to identify sales opportunities and refer consumers to branch employees who are dedicated to sales,” the report said. “Increasingly, call centre employees are required to sell banking products and services in addition to their role of providing customer service.”
2. Bank employees who sell the most are well compensated.
While senior management are very good at publically advocating “selling the right way and acting in the interests of their customers,” in practice, employees who sell the most are rewarded handsomely.
Employees who meet or exceed sales targets enjoy perks ranging from bonuses and gift cards to lavish prizes and all-expenses-paid holidays. This motivates many bank employees to place sales goals ahead of the needs of their customers.
3. Dubious selling practices are proliferating.
Banks are relying on so-called “mobile mortgage specialists (MMSs)” to help sell mortgages. These representatives venture out into the community to meet clients and business contacts, according to the FCAC.
Compensation is 100% commission-based and bank supervision of the conduct of MMSs is less intense.
“In some instances, banks sell upwards of 90 per cent of their mortgages through this channel,” the FCAC noted.
Customers who’ve signed up for a new product, such as a mortgage, at their bank branch are often asked if they’d like to purchase additional products, such as mortgage insurance.
While this practice, known as cross-selling, can benefit customers by helping them discover useful products they may be unfamiliar with, it can also result in the sale of unwanted or unsuitable products, the FCAC warns.
Also read: Three ways to secure the best mortgage rate