How to Deal with the Aggressive Sales Tactics by the Big Banks

About a week ago, CBC’s Go Public segment shed light on some aggressive sales tactics that big banks are using.  In the article, bank employees spoke out about the pressure they face from management to hit sales targets.  So in order to hit targets, they push credit cards, overdraft protection, premium chequing accounts, and lines of credit – regardless of whether or not the client needs the product.

“I was made to feel as if I was committing a huge wrong for looking out for the best interests of my customer over the interests of the bank,” says Dalisha Dyal, who worked as a TD teller in Vancouver for four years.

Another TD teller says the relentless pressure to meet sales numbers is so severe, the teller is currently on a medical leave.

In a follow-up story, employees from the other big banks have come forward with their own stories of high-pressure sales requirements.

A financial services manager who left BMO in Calgary two months ago said he quit after having a full-blown panic attack in his branch manager’s office as she threatened to stifle his banking career because he hadn’t met sales targets.

“It was like the only thing they cared about at BMO,” he said. “If you weren’t selling, you weren’t worth having around.”

Honestly, the article didn’t surprise me.  Anytime you visit a bank branch, they are usually trying to push some product or another.  If you get a mortgage with a big bank, it’s almost a guarantee that they will recommend mortgage life insurance (I recommend that you get your own term life insurance instead).  It’s really no different than any other sales oriented company – the same thing happens when you buy a car (ie. do you need an extended warranty with that?).

How else do you think that all the big banks hit record earnings/profits every single quarter?  In Q1 2017, Royal Bank (RBC) reported $3B in net income (earnings).  Yes, that’s 3 billion in profit over three months!  Bank earnings generally come from capital markets, credit cards, loans, insurance,  and retail (chequing accounts etc).  You will notice that chequing account fees (or minimum balances) go up every year, and they do that to keep up with earnings expectations.

As a dividend investor, I look forward to seeing big bank dividend increases coming from their rising earnings.  However, the issue I have is when they take advantage of people who really don’t know the difference.  Readers of this blog will know the difference financially between what products they need and don’t need.  However, there are many people that simply do not understand finances, and think that the bank has their best interest at heart.

If you are new to finances, and a salesperson or financial advisor asks you if you want a new product/service, the questions to ask are:

  • How much will it cost?
  • What are the benefits to me?
  • What are the drawbacks? and, if you really need the service/product,
  • Are there other lower cost solutions available?

If you don’t understand the real benefit of the new service, then you probably don’t need it.  It’s in your best interest to keep your fees as low as possible, and anything that goes against that should be questioned.

“We Cannot Index your Portfolio”

After writing my post on index investing for people who already have mutual fund accounts with a big bank, I’ve had a number of emails on the topic.  Since it’s RRSP season, a friend of mine, Barry, starting talking about his actively managed balanced mutual fund that he owns.  As you can probably guess, my first question was: “What is the management expense ratio (MER) of that fund?”

The response? 1.99%.  While 1.99% isn’t the end of the world, my friend could have a better performing portfolio by selecting lower cost index mutual funds.  I’ve explained how to pick bank mutual funds in detail here, but the gist of it is that he can create his own, lower cost, balanced fund by using four index mutual funds consisting of:

  • Canadian index;
  • US index;
  • International index; and,
  • Bond index.

All of the big banks have their own versions of the index funds above, with MERs typically within the 1% range.  So if my friend can reduce his portfolio drag from 2% to 1%, it can lead to a 30% larger portfolio after 30 years.

Armed with some new knowledge, Barry made an appointment with his mutual fund advisor to switch his balanced fund to a portfolio of index mutual funds.  When he inquired about the process of switching, he was first assured that “1.99% MER isn’t bad”, then was told that “we cannot index your portfolio”.   While Barry was confused, being true to the Canadian way he accepted what he was told, and invested in his usual balanced fund.

When he reported back what he was told, I first felt angry, then just plain dissappointed in that “advisor” and the affiliated bank. What ever happened to putting the client first?  I suggested to Barry to email the specific index funds to the advisor in case there was any confusion.  It has been a couple weeks with no response.  Needless to say, this situation has motivated Barry enough to set up a self-directed account with a discount broker.

I’d like to finish by saying that when it comes to your money, no one cares about it more than you do.  So take care of your money, keep your costs low, and your wealthy future self will thank you for it.

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FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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4 years ago

I had an interesting experience with a TD investment representative. I went there with the objective of opening an E-Series product (0.35% MER), with an automatic monthly contribution. After trying to set me up with the regular mutual funds, which I of course refused, the rep said she didn’t know how to do what I wanted, and suggested I speak to a TD Waterhouse rep, and administer it through my brokerage account.
What led up to this visit to the bank was a discussion with co-workers who are funding their mutual funds every month, and paying the 2% MER, for substandard performance. I did research and found that the TD E-Series funds could be administered through a regular checking account. A visit to the bank seemed to prove otherwise. Why not make it easier? Probably because they need those commissions…

Leo T. Ly @
4 years ago

One way to stop the aggressive sales tactic from any industry is to go into your appointments armed with your research and questions. If you are prepared when you are at the meeting, you can dictate the flow of the meeting, ask questions and get answers to compare with you research. I find that when I dictate a meeting, I get all the information that I want from the sales rep and they won’t try to sell me anything extra.

Also, I always provide a short summary of my current situation and tell the sales rep exactly what I am looking for.

4 years ago

Im a bit torn on this topic. Althouh the banks should not be taking advantage of the uneducated and they certainly shouldnt be opening accounts without peoples permission they are in business to make money. We as consumers need to be aware and evaluate whether the offer is in our best interest, shop around, negotiate, and be prepared to go elsewhere if we dont like the terms.

As far as their employees feeling a lot of pressure to sell I firmly believe its likely more an issue of these employees not being in the right role. Ive worked in sales (not in financial services) my entire career and there is always a level of pressure. Thats not to say that certain managers arent taking things too far as im sure that there are some bad managers at the banks who are ineffective themselves and resort to screaming and yelling instead of coaching employees on how to do a better job.

4 years ago

One has to wonder how sustainable this approach is. Sure, the banks are raking in the fees now, but are they killing the goose? When there are low- and no-fee options, how much longer will people put up with this crap?

Dan @ Stocktrades
4 years ago
Reply to  Ian

We promote a ton of PC Financial and Tangerine to our viewers in our email lists and on the site. The reality of it is from most of the reactions from people, they simply do not want to go through the effort to switch, and it’s sad.

4 years ago

Until not very long ago (5-10 years?), even members in my own family (rural AB) were under the impression that switching a chequing account from your beloved, long-time house bank to whoever would affect one’s credit rating!!
Secondly, there is still a hesitancy to move away from a brick and mortar bank to a primarily online bank.

Dan @ Stocktrades
4 years ago
Reply to  Tallsamoan

Yes there definitely is hesitancy about the legitimacy of online banks in the older crowd it seems. Like they say, can lead a horse to water but you can’t make him drink. Hopefully they drink before the big banks suck the watering hole dry

Dan @ Stocktrades
4 years ago

Great article. I switched to Tangerine after getting tired of the big banks. I still have credit cards with Royal Bank but that’s about it. Non stop pressure to buy products you simply don’t need, and fees out the yin-yang. It’s a shame they can take advantage of people who just aren’t educated in the area.

4 years ago

I was happy CBC brought this issue to light. I work in the financial services industry and I have noticed a steady trend of more emphasis on sales and less emphasis on customer financial well-being. Sometimes the two goals are aligned and sometimes they are not. Many people used to rely on their banker like a doctor, lawyer, or accountant. A trusted advisor. I would never recommend relying on a chartered bank employee for unbiased advice. The major problem is that a large segment of the population is financially illiterate. I don’t judge them for this. I can’t fix my own car (even though many of my friends can). The financially illiterate people need good advice. The fee for service movement has never gained momentum like it should. I think there is definitely room for a new model of banking. A true trusted advisor devoid of high interest overdrafts, high mer mutual funds, horrible life insurance on lending products, and loans to people who truly can’t afford it. This bank would be a lot less profitable than the chartered banks but it could do a tonne of volume.

4 years ago

Yeah I think this is completely blown up. Everyone sells. You sell yourself when your talking to someone you don’t know. I bank rbc and yes everytime and I mean everytime I go see a teller they bring up overdraft protection. I honestly laugh and say u guys bring that up everytime! I don’t need it. There’s always money there but it’s probably a easy up sell for most people. Sadly again it’s the people with no financial knowledge getting screwed.

4 years ago

I was in the same situation that your friend Barry was a few weeks ago when I was trying to transfer some money into a LIRA with one of the major banks… the bank advisor told me I could not open a self directed account with this type of money (a lie and I knew it), she then proceeded to tell me however she could put my money into a series of mutual funds or a managed portfolio with MERS upwards of 2%. I told her I know I can open a self directed account with a LIRA as it even says so on their website. She then told she had to speak to her boss to make sure this was “ok” with the bank. Now since the account has been opened it took her over a month to transfer the funds into my account and complete the paper work. 5 voicemails and no call back until I threatened to call her manager in a voicemail.

Now my account is setup in a self directed manner with index funds… I don’t think the advisor was pleased I called her on her sh*t to put my money in mutual funds where she would make a commission. I’m starting to hate the banks more and more everyday. More people need to educate themselves on personal finance

4 years ago

Thanks for bringing the pushy sales tactics of the big banks to light.
I moved my primary banking from RBC to ING/ Tangerine a few years ago but could not get myself to close my RBC chequing account. I did have a credit line and Visa as well. I kept paying the premium fees without little value. IF I did indeed needed to visit an RBC branch to change foreign currency you were always, without fail, hit with an upgrade sales pitch (Avion? Increase Credit Limit on Visa?? Travel Insurance???) I dreaded just walking through that door.
I finally cut the cord with RBC about a month ago when they announced another round of fee & interest increase on certain products. I do have an excellent credit rating, but they still decided to up my credit lines’ interest rate by a whopping 1.5%. With the increase I would have had a Prime + 8.35% interest rate on my LOC!
I called them on it and argued my case that I was expecting a lower rate for being a loyal customer for years with excellent credit but they would not bulge and pretty much expressed that they don’t care to work with me.
I paid off the last few $ on my LOC immediately, and closed both LOC and premium chequing account. Never felt better!

Having said that, I have been fairly happy with the ING – now Tangerine – situation for the past 7 years. Their customer service has been good, but also increasingly offered upsell pitches as of late. I will monitor the situation and if their fees also increase (on order of Scotiabank), I may just shop around again.

4 years ago
Reply to  Tallsamoan

That is an outrageous rate for an LOC!

4 years ago
Reply to  Ian

My exact words to RBC! Any my credit rating starts with an 8!
I just signed up for a non-secured, no-fee Mastercard with MBNA at 7.99%, which will replace my LOC, if necessary.

4 years ago

Great article. I have my investments spread among 3 of the big banks. I’ve had all three try and sell me on services and they should. They are a business and as an investor in some of these institutions I expect them to try and be profitable. I also own a business and sell to my clients, I like to think I don’t sell things that aren’t needed but it’s pretty easy to justify needs or conveniences and they maybe could they get a better deal if they shopped around? At the banks the facts are that a very low percentage of customers are complaining, this came from an employee that obviously didn’t realize the job they were signing up for. As for the people without basic math skills that sign up for things that hurt them I find it hard to feel sorry for them. Some people just can’t be helped. I’ve tried.