Donald Putnam, managing director of New York investment banker Putnam Lovell NBF Securities Inc., attempted to shatter some industry myths Tuesday, the final day of the Investment Dealers Association of Canada annual conference.

Putnam, addressing issues of convergence and divergence in the financial services business, suggested the notion of a global market is a myth. Instead, each financial market is highly individual. So, the notion of a globally effective competitor is misguided, he argued.

Touching on the notion of domestic bank mergers, Putnam said that he doesn’t necessarily see much value in these deals. He also warned Canadian banks against making big plays for U.S. banks. He said that then either the acquiring firm has to let the original management run the business, which is too much for most bankers’ egos. Or, they have to run it. But successful management in a concentrated banking industry such as that in Canada doesn’t do well when it can only buy the 100th biggest bank in a market such as the U.S.

“It didn’t work for the Greeks, it didn’t work for the Romans, and it’s not going to work for the Canadians,” he told the conference in St. Andrew’s by-the-Sea, N.B.

Instead, banks should look for similar markets in foreign countries, in which they can make gains. He pointed to the Bank of Nova Scotia’s strategy in Mexico, where it has a subsidiary, as a wise one. “The cultural differences created by language are far less than those obscured by it,” he quipped.

He called on the government to open up the Canadian market to more foreign players.

In a series on one-liners, Putnam also observed that:

  • cross-selling has almost never worked, and that cross-pillar acquisitions have a tough time. “You take an asset manager who’s a greyhound, a bank buys it and it becomes a Greyhound bus;”
  • the relationship a high-net worth client has with his or her private banker is similar to “the relationship one has with their gynecologist — intimate and undescribed;”
  • hedge funds need more transparency and may produce the standout performance many say they do. “Hedge funds should be like marital sex — immensely satisfying and non-comparable,” he said. He called the notion that hedge funds are about transparency and high returns, “the bullshit of institutional sales.”