Over the past several months, CARP has been raising a serious concern about how investment advice is delivered inside Canada’s major bank branches. Many Canadians, particularly those seniors with average savings or limited financial experience, walk into their bank believing they are receiving expert financial guidance and advice. In reality, the person across the desk is often restricted to recommending only the bank’s own proprietary investment products. That structure, sometimes called a “closed product shelf,” means that even if a better-performing or lower-cost option exists elsewhere in the market, it may never be presented to the client. CARP believes this raises fundamental questions about competition, transparency, and whether the system is truly working in the best interest of investors.
Whenever this issue is raised, the first response we often hear is a simple analogy: “When you walk into a Ford dealership, you expect to be sold a Ford.” Or: “When you go into the Apple Store or Lululemon, you get their products.” At first glance that argument sounds reasonable. Businesses sell what they produce. But the comparison breaks down very quickly when you look at the expectations consumers bring into those situations. A dealership or retail store is clearly a sales environment. Consumers understand that the person helping them is there to sell that brand’s products.
When someone is buying a car, they rarely rely on one salesperson alone. They comparison shop. They visit multiple dealerships, read AutoTrader or Car and Driver reviews, ask their mechanic or friends for advice, and compare reliability, fuel efficiency, safety ratings, and resale value. Everyone understands the salesperson on the lot is selling inventory. That is why consumers look elsewhere for independent information before making a decision.
Bank branches operate under a very different expectation. Canadians walk into their bank believing they are sitting down with a financial advisor, someone who is helping them make important decisions about their investments and retirement security. For many people, especially older Canadians who have built relationships with their bank over decades, that trust runs deep. They assume the advice they are receiving reflects what is best for them financially, not simply which product happens to sit on the bank’s shelf.
The more accurate comparison is not a car dealership, it is the relationship people have with a lawyer, a real estate agent, or a doctor; professionals whose role is to guide clients based on expertise and judgment. When a doctor recommends a treatment or a lawyer gives legal advice, we expect that recommendation to be based on what is best for the patient or client. We do not expect them to recommend only the options that happen to also benefit them!
CARP’s concern is about transparency and trust in the financial advice Canadians receive. When people sit down with someone they believe is their advisor, they expect guidance that reflects the best options available to them. Too often, however, that conversation is limited to a closed shelf of in-house products. If an advisor cannot recommend options across the broader marketplace or is incentivized to promote certain products that benefit the bank, Canadians deserve to understand that clearly. Advice and sales are not the same thing, and consumers should know which one they are receiving.
This issue matters especially for seniors and everyday investors. Wealthier clients often have access to independent financial planners or portfolio managers who can recommend products from across the entire market. The banks each have their own ‘wealth-management’ divisions, like RBC Dominion Securities, BMO Nesbitt Burns, CIBC Wood Gundy, to name a few… and they can advise their clients on the full range of investment options available in the marketplace… but millions of Canadians, with smaller accounts or less financial knowledge, rely almost entirely on the advice they receive at their bank branch. If that advice is limited to a closed shelf of proprietary products, those investors may never see the broader range of options that could better serve their long-term financial goals.
That is why CARP has brought this issue forward publicly and raised it with regulators and competition authorities. Canadians deserve a financial system that is transparent, competitive, and worthy of the trust people place in it.
Anthony Quinn – President, CARP
