I recall attending a presentation by a senior executive of a major bank a few years ago in which he emphasized that his bank’s strategy was to “sell seven products” to each customer. Getting everyone to borrow was the first step – whether that is a mortgage, loan, or line of credit – because that’s where the bank was the most profitable. Loaning money out to you at a few percentage points more than they paid on savings accounts or GICs.
Why 7 products? Because the bank’s research showed that customers who had “bought” seven products were the most loyal. Once you owned that many products or services, they likely had you for life. You were unlikely to move to a competitor even if you weren’t happy simply because of the sheer detail associated with changing banks.
Look what can go wrong with this marketing strategy. Witness the Wells Fargo fiasco in the U.S.A. which came to light in 2016 where 5,000 employees were fired over five years. Because of the corporate emphasis on opening new accounts and bonusing employees accordingly, millions of phony accounts were opened in the names of existing customers. The Washington Post (Renae Merle and Heather Long, Feb.2, 2018) reported that “Some customers were charged with overdraft and other fees that harmed their credit score”. And The Post also stated that “…The Fed said it was troubled to hear allegations that the bank charged hundreds of thousands of customers for unneeded automobile insurance and other products, driving some to default on their loans and see their cars repossessed.”
The message: compensation drives behaviour. In a product-pushing environment – whether employees are on commission or a salary that is a function of individual or office quotas – some people will find a way to take advantage of the system.
So, why do we at Polson Bourbonniere Derby Wealth Management say that we’re “Product Neutral”? Flash back to five years ago. Historically we had always been upfront with our clients about how we were compensated. But not only did we want our compensation to be “transparent” – in other words “visible”, we also believed strongly that in recommending products going forward we should be “neutral”. Have the ability to use whatever products were most suitable to meet your goals and objectives. Separate our compensation from the product. Eliminate any chance of compensation driving behaviour.
That’s why we opted to move to charging a fee for our services. Not taking any commission. Designing a Worry-Free Retirement Experience™ for you that isn’t product driven. Putting ourselves in a position where we are “neutral” as to what product(s) we recommend to you. Being able to use whatever investment product(s) is on the shelf.
When all you have is a hammer, everything looks like a nail. You can’t see the alternatives. The next time you speak to a Financial Advisor, ask about their licensing and the products they sell, to ensure you are not restricted to stocks or mutual funds only. By being product neutral, advisors can provide their clients with the best advice and solutions for their specific needs.
Contact us for an opinion first. Choose to be Worry-Free™.
This information has been prepared by Kirk Polson and Derek Polson who are Investment Advisors for HollisWealth® and does not necessarily reflect the opinion of HollisWealth. HollisWealth® is a division of Industrial Alliance Securities Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered. Polson Bourbonniere Derby Wealth Management is a personal trade name of Derek Polson and Paul Bourbonniere.