Investigative journalism and regulatory research suggest that the sales culture at Canada’s major banks often leads to suboptimal, high-fee investment products being recommended to clients, with one in four bank representatives acknowledging that products not in clients’ best interests are sold at least sometimes.
For many investors, a local bank branch is the first port of call for financial advice. However, a growing body of evidence from journalistic investigations, Canadian regulators, and academic research indicates that the advice provided may be more beneficial to the bank than to the client. The core issue lies in a sales-driven culture where advisers are incentivised to prioritise product sales over client outcomes.
A March 2024 investigation by CBC News found employees at Canada’s five largest banks were under significant pressure to meet sales targets, sometimes risking their jobs if they failed. This environment led to questionable advice, such as recommending the bank’s own mutual funds or GICs over paying down high-interest debt, and misrepresenting the impact of fees on investment returns.
To investigate these claims systematically, the Ontario Securities Commission and the Canadian Investment Regulatory Organization conducted an anonymous survey of nearly 3,000 mutual fund representatives working in bank branches. The results, published in November 2024, paint a concerning picture of the industry’s standard practices.
The survey revealed that the average bank mutual fund representative holds only the bare minimum credential required to sell funds and has six years of experience. Crucially, their compensation structure often creates conflicts of interest.
- 32% of representatives agreed their compensation places more value on sales volume than advice quality.
- 35% agreed their compensation may increase the risk of recommendations being unsuitable for clients.
- 68% reported experiencing sales pressure at least sometimes, with 35% experiencing it often or always.
- 25% indicated that clients have been recommended products or services not in their best interests at least sometimes.
Beyond sales pressure, product availability is a significant constraint. Most bank advisers are limited to offering their own institution’s funds, which are typically high-fee, actively managed products. While 78% of representatives believed their product range met client needs, almost half agreed clients would benefit from access to a broader range of funds from external providers.
This regulatory findings are supported by academic research. A 2018 study found that transactions initiated by bank advisers were more profitable for the bank than trades executed independently by the same client. Furthermore, advised clients underperformed compared to those investing on their own, suggesting advisers prioritised bank profitability over client outcomes.
Conflicts of interest are only part of the problem. A 2021 study found that financial advisers often make the same behavioural mistakes in their personal accounts as they do for their clients—excessive trading, return chasing, and a preference for expensive funds. This indicates a widespread lack of foundational investment knowledge, as evidenced by 23% of bank representatives in the regulatory survey being unable to correctly define a Management Expense Ratio (MER).
For investors seeking trustworthy advice, the solution lies in seeking out qualified professionals operating within a different framework. Key differentiators to look for include:
- Advanced Credentials: Look for advisers holding rigorous designations like the Chartered Financial Analyst (CFA) or Certified Financial Planner (CFP), which require extensive study and enforce ethical standards.
- Fiduciary Duty: In Canada, discretionary portfolio managers are generally held to a higher legal standard (a fiduciary duty) than non-discretionary mutual fund representatives.
- Compensation Structure: Prioritise firms where adviser compensation is not tied to product sales but to providing high-quality, conflict-free advice.
- Firm Culture: Seek firms that independently certify their client-first practices and actively promote ongoing education for their advisers.
While not all bank advisers provide poor advice, the systemic incentives and cultural pressures within major financial institutions create an environment where suboptimal client outcomes are a frequent result. For investors, understanding these structural conflicts is the first step toward finding advice that truly serves their best interests.