Bank's Post  Big Profits: A Win For Shareholders 

(What About Their Clients?)

When you call your bank advisor, who answers the phone? In all likelihood a computer generated voice that will steer you to multiple options. Why employ a human when the world is moving to technology driven cheaper alternatives. 

Perhaps you prefer email communication? But is it always secure? In my days as a branch manager at a couple of financial institutions, I can recall numerous episodes where client emails and personal financial information were hacked and fraudulent requests made to send money to a supposed distressed traveler, impersonating the client.

Any transfer of money had to be verified directly with the client by phone.

Nonetheless, in order to cut costs and increase margins and earnings, bank financial advice is heading to a more robo-style offering. Even the more expensive human advice givers are being squeezed out and with them, personal service.

If you are big enough (i.e. lots of assets to be invested and therefore more "worthy" of attention) to have one of the "big producer" advisors, getting their attention is going to be more difficult as they bring in more assistants to run interference so that they can handle their increased client load, as smaller advisors are shown the door.

Remember, large advisors (at these financial instituions / banks) are paid a commission that is based on a certain % of the fees that they generate. The % commission that they are paid is based on a "grid" that depends on the total "production" that the advisor has generated over the previous 12 month period.

If, as an advisor, your production does not cut it, your place on the grid may render your commissions received too low to provide you with a reasonable income. You then have to make a decision as to whether this is the right work for you. Or you go and find a way to increase the revenue you are generating.

 If the incentive for an advisor is to grow revenue (to find a good place on the payout "grid"), is that a conflict of interest? Who's needs are being attended to first and foremost? Do the client's needs become secondary to revenue generation?

As a client of a very profitable bank or investment dealer you should want to ask those questions. 

As an independent, employee owned portfolio and wealth management company, we (at High Rock) have committed to put our clients first and our shareholders (us) only benefit because we do a good job for our clients. Of course we earn our fees in the course of looking after our clients, but our incentives are pure and derive from managing our client's wealth using the exact same assets as we purchase for our own portfolios (clients may have different allocations according to their personal strategy).

And we answer our own phones.

Owning shares of Canadian banks may just be better than being clients of them.