While a major new survey of bank-based fund dealer reps by the Ontario Securities Commission (OSC) and the Canadian Investment Regulatory Organization (CIRO) captures the prevailing views of reps about their working conditions, Investment Executive’s own research has been documenting their concerns for years.
As part of its annual Report Card series, IE has surveyed bank branch-based advisors for more than 20 years now, and complaints about pressure to produce and sales quotas in the bank sector are nothing new.
Indeed, in response to IE’s Report Card on Banks (RCB) survey in 2002, a branch advisor with CIBC complained, “The sales targets are getting impossible.” (Prior to 2016, the RCB included the big banks as well as credit unions; the report now only focuses on the major six banks.)
More than two decades later, according to the regulators’ new research, reps still have complaints about sales pressure, and its possible impact on recommendations to investors.
IE‘s own RCB research has similarly documented an erosion in branch advisors’ perception of their freedom to make independent product recommendations, and the quality of their firms’ product shelves.
For instance, back in 2015, advisors working with banks and credit unions gave their institutions an average performance rating of 8.9 out of 10 for both “freedom to make objective product choices” and “quality of firm’s product offering” — a rating of 10 represented absolute freedom as well as the highest possible product quality.
Since then, bank branch advisors’ ratings for those categories have declined. In our most recent RCB results from 2024, focused only on the big six banks, the institutions were rated 8.4 out of 10 for performance on average for both the product freedom and product quality categories.
IE‘s longitudinal RCB data generally reveals that while there were signs of shifting perceptions in the 2016 to 2019 period, the decline in advisors’ average ratings for their banks’ product offerings have crystallized since 2020. One driver has been the decision in 2021 by several banks to restrict branch advisors’ freedom, only allowing them to sell their banks’ own in-house, proprietary products.
Even so, the one concerning trend has been the apparent disconnect between how these advisors have been rating their product freedom in recent years and how they talk about it. Despite the average product ratings dropping in the past 10 years, and the restrictions they’ve been given, most big bank branch advisors in 2024 seemed fine with their options. For example, some advisors with both BMO and Bank of Nova Scotia shared in last year’s report that more choice and flexibility seemed unnecessary.
Over that same period, these advisors’ views about their banks’ approaches to compensation have been relatively stable.
In IE‘s annual surveys, these advisors’ average performance ratings for their “compensation structure” has essentially remained unchanged over the past decade. Overall, the banks and credit unions were rated 8.0 out of 10 in 2015 and, just for the big six banks, 8.0 again in 2024. (Branch advisors are generally paid a salary with bonuses, with those elements making up nearly 80% of the average bank advisor’s compensation in the 2024 RCB.)
Still, this shows that the branch advisors have consistently rated the banks lower for their compensation practices than they have for banks’ product freedom and product shelf quality — and that’s been the prevailing view for years in the research. This theme was explored in the 2023 RCB, for instance, which found that steep rises in inflation and other economic stressors were leading to pay concerns among the respondents.