Canada needs a federal investment protection agency, separate from the banking and investment industry, to protect Canadian consumers from some of the practices of Canada’s big banks, says a former longtime bank employee.
Larry Elford, a former certified investment manager with RBC, said some parts of the banks’ activities fall under federal jurisdiction while others fall under provincial jurisdiction.
“The silos that separate the mutual fund salesman from the bank employee, from the investment salesman, from the provincial regulation, from the federal regulation are like a shell game,” Elford said in a news conference on Parliament Hill ahead of his testimony before MPs on the Commons finance committee, which is holding hearings into the sales practices of Canada’s big banks.
He cited the example of an elderly woman raising a middle-aged blind son, distressed after her financial institution talked her into taking out loans she couldn’t afford to buy mutual funds that were riskier than they should have been.
Elford said the business cards he saw from the financial institution she dealt with, showed different titles for the same person and the person authorizing the loan was the same person selling her the mutual funds.
“Quite frankly, there’s no one who can keep track of this, and there is certainly no one at the FCAC (Financial Consumer Agency of Canada) who is keeping track of this and trying to make sense of it.”
Elford said many financial institutions lead clients to believe that they are dealing with a licensed financial “advisor “when they are actually dealing with an “adviser” who isn’t licensed and whose job is simply to sell products regardless of whether they are in the client’s best interest.
“It’s worth billions of dollars every year to exploit the difference between an o and an e on a person’s business title.”
“There has to be a separation between persons who sell products for a bank or any institution and persons who give advice which is considered and required to be in the fiduciary best interest of the client.”
Elford said the finance committee hearings are lifting the lid on an important issue for Canadians.
“I think we’re opening a Pandora’s box here, and the Pandora’s box has to be opened and opened,” he said, adding some MPs appear to want to close the lid on that box.
Elford will be testifying before MPs later today when the House of Commons finance committee resumes its hearings into the practices of Canada’s big banks.
Also scheduled to appear are former bank employee Sally Watson and Stan Buell, president of the Small Investor Protection Association.
The hearings come in the wake of a series of stories by CBC’s Go Public in which bank employees described questionable practices by some of Canada’s biggest banks. Allegations include pressure being put on employees to meet ever increasing sales targets, signing clients up for services without informing them and forging signatures and initials.
Bankers on Monday
To date, thousands of bank employees have contacted CBC’s Go Public, describing stress-inducing pressure to increase sales.
On Monday, MPs heard from the Financial Consumer Agency of Canada, which says it has launched an investigation into the banks’ practices, and the Canadian Bankers Association. Representatives of Canada’s big banks are to appear Monday.
If, after the hearings, the committee finds that there are problems that can be addressed by government action or tighter regulations, the committee can recommend to the government that it act.
Elizabeth Thompson can be reached at [email protected]