Canadian Banks

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BRIAN5000
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Re: Canadian Banks

Post by BRIAN5000 »

Hammerer wrote:
BRIAN5000 wrote:
Thegipper wrote:The CU contacted me and said they would give me a better rate is I transfer
This type of salesmanship is illegal it's called tied selling.
Does this apply to CUs? (And I guess the regs would vary province to province). I thought tied selling prohibitions was a federal bank act thing.

Now only if the CRTC could apply the same philosophy for the same reasons.
Clearly looks like ties selling to me but INAL.
I think it applies to CU's as well not sure, like a Credit Union is not allowed to advertise Insurance sales on its deposit site.

http://www.investopedia.com/terms/t/tiedselling.asp

BREAKING DOWN 'Tied Selling'
For example, your bank's mortgage specialist tells you that you qualify for a home mortgage. Then you're told that the bank will approve it only if you transfer your investments to the bank or its affiliates. You want the mortgage, but you don't want to move your investments.

The following example will help to explain the bundling of bank products and services.

You plan to open a deposit account that charges you for individual transactions. The financial institution representative offers you a package of services that includes a comparable deposit account, a credit card with no annual fee and a discount on purchasing travelers cheques. The total price for the package is less than if you purchased each part of the package separately.
Bundling products in this way is permitted because you have the choice of buying the items individually or in a package.
This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed
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ghariton
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Re: Canadian Banks

Post by ghariton »

BRIAN5000 wrote:Clearly looks like ties selling to me but INAL.
It's bundling, not tied selling.

Bundling is a discount if you purchase a number of items from different product lines at the same time and you get a discount. For example, you go to McDonald's and buy a "happy meal" of burger, fries and soft dring for a total price that is less than the sum of the prices of the individual components.

Closely related to volume discounts: Buy a dozen shirts and pay for only ten.

Tieing says you have to buy all the pieces, because they won't sell you the individual pieces at any reasonable price. For example, we won't sell you a car without brakes and a brake system separately. We will only sell you the two tied together. Or to pick a real life example from the 1960s: Our photocopier will only work with this paper that only we sell. If you buy the copier from us (and want to use it), you have to buy the paper from us too.

Generally both bundling and tieing are legal. But there are exceptions, when bundling or tieing would likely limit competition, i.e. if you are using them to build or maintain a dominant market position. So for the photocopier example, you might have a monopoly on photocopiers but not on paper. But by tieing the copiers to the paper, you might hope to extend your monopoly over that kind of paper too. (The whole thing became moot when the patents on the copiers expired.)
I think it applies to CU's as well not sure, like a Credit Union is not allowed to advertise Insurance sales on its deposit site.

That's not intended to encourage competition. It's intended to discourage competition. The insurance companies don't want any competition from other financial institutions, and so have lobbied long and hard against their obtaining a license to sell insurance products.

George
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twa2w
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Re: Canadian Banks

Post by twa2w »

George is right.

More simply put
Tied selling in the context of Canadian banks is telling a client the bank will only approve a mortgage if the client moves their investments to the bank or its subsidiary.
Saying the client can get a better rate if they move the busiess is not tied selling but bundling.as George has so thoroughly outlined.
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Re: Canadian Banks

Post by bpither »

Funny the sell off should occur on Friday when the report has been out since Monday the sixth ( I sent copies to my friends on that day)

I was told a couple of weeks ago that I "qualified for a free wealth assessment" by a cheeky teller at my local branch. I chuckled and replied,"why do I 'qualify' for that"? "To ensure you have the right portfolio mix" she said. "Right", said I,"TD is my largest holding and I'm expecting another dividend increase in March". I think she knew when to stop.

So it dropped 5% on Friday - big deal. After all the chatter dies down it will wander back up just like Wells Fargo.
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Re: Canadian Banks

Post by ig17 »

I spent a few minutes reading Big 5 employee reviews at http://www.ratemyemployer.ca. They all sound the same; TD doesn't seem to be any worse than the other banks. You can do a blind test and I bet you wouldn't be able to figure out which bank page you are reading. A frequent complaint is the pressure to sell, sell, sell; borderline unethical selling tactics; blatant disregard for clients' interests.
BRIAN5000
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Re: Canadian Banks

Post by BRIAN5000 »

twa2w wrote:George is right.

More simply put
Tied selling in the context of Canadian banks is telling a client the bank will only approve a mortgage if the client moves their investments to the bank or its subsidiary.
Saying the client can get a better rate if they move the busiess is not tied selling but bundling.as George has so thoroughly outlined.
Let's say current mortgage rates are between 3%-4% for a 5 year mortgage.

Yes sir you can have a 5 year mortgage at 4% or higher maybe 5% not competitive ........ pause but if you move everything you have here then we will give it to you at 3%. Maybe in court this isn't tied selling but in my mind it is.
This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed
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ghariton
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Re: Canadian Banks

Post by ghariton »

BRIAN5000 wrote:Let's say current mortgage rates are between 3%-4% for a 5 year mortgage.

Yes sir you can have a 5 year mortgage at 4% or higher maybe 5% not competitive ........ pause but if you move everything you have here then we will give it to you at 3%. Maybe in court this isn't tied selling but in my mind it is.
It's normal business practice. You run into it in many, many lines of business

Telecommunications (wireline, wireless, Internet, TV)

Restaurants (set meals versus a la carte)

Travel tours (flights, hotels, side excursions)

Costco (buy a membership card and get lower prices on everything including gasoline)

Landscapers (let us cut your grass and we'll give you a discount on snow removal)

Usually this doesn't limit competition, in fact it may increase it. After all, if a certain bundle is popular, many competitors will be offering it. In fact, the vast majority of the time both the seller and the buyer are better off. As I said in a previous post, this is only problematic if it serves to reduce competition or block entry, e.g. if the bundler has a monopoly somewhere in the bundle and is seeking to extend it. That strategy is pretty rare these days. On the few occasions it has been tried, it has failed.

So I think of it as a feature (a positive), not a bug (a negative).

_______________________________________________________________________________

Returning to the original topic of this thread, I've been banking with Canada Trust and then with TD CT for over thirty years. While they have done many little things that I find annoying, over all they have not tried to pressure me into purchasing services that I don't need, they haven't spammed me (like the telcos and cablecos do), and their staff has been very helpful when I needed help. Over all, I'm a reasonably happy camper. If it were my practice to invest in Canadian equities, TD would be high on my list.

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SQRT
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Re: Canadian Banks

Post by SQRT »

Excellent (in my view) article in the G&M this AM (Michael King, B4) about what's causing the issues around Bank sales practices. Also, Carrick wrote about the levels and types of complaints being raised with various Ombudmen. This reinforces my view that the current sales practice controversy is a buying opportunity.
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Arby
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Re: Canadian Banks

Post by Arby »

Got a call this morning from BMO Mastercard, trying to sell me a home monitoring solution. Told the agent I was not interested, but the agent said they would give me some more time to think it over, and would call back. I told them to remove my name from any future marketing calls, or I would cancel my BMO Mastercard.
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Re: Canadian Banks

Post by fundamental »

Looks like all the banks are doing it
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AltaRed
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Re: Canadian Banks

Post by AltaRed »

Arby wrote:Got a call this morning from BMO Mastercard, trying to sell me a home monitoring solution. Told the agent I was not interested, but the agent said they would give me some more time to think it over, and would call back. I told them to remove my name from any future marketing calls, or I would cancel my BMO Mastercard.
Indeed. I used to get those calls from CIBC (I hold their Dividend Visa) until I told them the same thing. Have never been called again.

Added: The solutions are easy. Use them. Say No.
Last edited by AltaRed on 16 Mar 2017 13:49, edited 1 time in total.
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Shakespeare
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Re: Canadian Banks

Post by Shakespeare »

A waitress upsells you when she wants to know if you want mushrooms and gravy. Or a car salesman if he wants to know if you want seat protection.

It's standard practice.
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Re: Canadian Banks

Post by Profit not Prophet »

Ya the phrase do you want fries with that. I guess it's different from them adding fries without asking.

So were all capitalist pigs defending our turf ! How dare they attack my dividend stream :) It's a testy citizenry or are they all just consumers now. Deep breath and a week from now it will be back to clothing malfunctions and cat videos I suppose.
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Re: Canadian Banks

Post by Hammerer »

Any ideas on how to turn the call around and upsell the caller?

Maybe say they seem really good at their job, suggest some job boards that may have better positions? "My friend used to do the same job as you. The interviewers all saw a lot of value in his experience at the call centre, now she makes $xyz/year" ?
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Re: Canadian Banks

Post by Thegipper »

Wall St and Bay ST want to see growth in top line and bottom line and they want to see organic growth. If they are successful the shareholder is rewarded with capital gains and increased dividends. Given the nature of the beast employees must be salespeople for their employers. At some point there must be some responsibility on the consumer to make informed and knowledgeable decisions. That is the reason that we join and participate in forums like this. Is it ethical that banks sell and promote mutual funds especially their own? I encounter supposedly well educated and intelligent people who make poor decisions on credit cards, personal finance and consumer choices. What's the solution? a liberal, left nanny state?
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ghariton
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Re: Canadian Banks

Post by ghariton »

Hammerer wrote:Any ideas on how to turn the call around and upsell the caller?
Life is too short.

The simple rule is: Never buy from someone who is selling door-to-door and never buy from someone who is upselling you, especially over the telephone, without thinking about it for a day or three.

It's about time Canadians learned to be responsible consumers, not credulous fools.

George
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Re: Canadian Banks

Post by Thanh »

I used to receive multiple phone calls from my banks (3 of them so its definitely not just a TD-thing) and then I moved which resulted in having to change phone numbers. I never gave my new phone number to my banks and voila, no more sell calls !
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Re: Canadian Banks

Post by twa2w »

All of the banks have a system to control solicitation.
This can be a blanket do not call/ mail for any reason.
Or do not solicit via phone or mail for any product promotion.
Or it can be done by product line. Each bank will have a slightly different format.
Just let your branch know and they will input the proper codes.
This will control phone and mail solicitation from call centres.
It may not control direct solicitation from a teller or other employee when you are within a branch.
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Re: Canadian Banks

Post by SQRT »

Interesting article in the G&M on Thursday (Apr 20). They looked for names that consistently beat the TSX index. Came up with 10 names and 6 of them were the big banks. Over a 10 year period the best name was TD while over other periods various banks were best. This reminds me of a report I read around 2002-2003 from BMO which highlighted the same thing only going back 40 years! It is remarkable how the banks have consistently (over most periods) outperformed the TSX.

Why would this be? Can't be luck. There must be something inherent in the Canadian banking structure that allows or even encourages this outperformance. Obviously no guarantee of future outperformance, and many would argue that big changes are coming to financial markets, but still seems like a pretty good risk/return relationship.
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Re: Canadian Banks

Post by Taggart »

SQRT wrote: 21 Apr 2017 06:08
Why would this be? Can't be luck. There must be something inherent in the Canadian banking structure that allows or even encourages this outperformance. Obviously no guarantee of future outperformance, and many would argue that big changes are coming to financial markets, but still seems like a pretty good risk/return relationship.
I've no way of checking on the veracity of the data, but.....

from the book "Tips From The Top" by John St. Croix

$1000 invested in TD Bank in 1957 earned you $29,481 in dividends + $59,997 in capital gains by 1995.

and from the book "Investing The Billionaire's Way" by J. Richard Charlton

Investing $100,000 invested in Bank Of Montreal in 1952 earned you $410,093 in dividends + $456,875 in capital gains by 1983.
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Re: Canadian Banks

Post by SQRT »

Taggart wrote: 21 Apr 2017 09:23
SQRT wrote: 21 Apr 2017 06:08
Why would this be? Can't be luck. There must be something inherent in the Canadian banking structure that allows or even encourages this outperformance. Obviously no guarantee of future outperformance, and many would argue that big changes are coming to financial markets, but still seems like a pretty good risk/return relationship.
I've no way of checking on the veracity of the data, but.....

from the book "Tips From The Top" by John St. Croix

$1000 invested in TD Bank in 1957 earned you $29,481 in dividends + $59,997 in capital gains by 1995.

and from the book "Investing The Billionaire's Way" by J. Richard Charlton

Investing $100,000 invested in Bank Of Montreal in 1952 earned you $410,093 in dividends + $456,875 in capital gains by 1983.
Right, no one can dispute the facts but I wonder why they have done so well, so consistently, for so long? If we understood this better, we might be in a position to assess whether it could continue. I am also still surprised that given this consistent outperformance they still trade at a discount (P/E) to the market?
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Re: Canadian Banks

Post by AltaRed »

Are our bank P/Es really at a discount to the 'global' banking market, i.e. comparing banks to banks? FWIW, I think bank financials are too opaque to really know what is going on and don't warrant more valuation given the 'trust me' nature of their business. FWIW2, I have 4 of the big 5 in my portfolio so it is not as if I am knocking them. I just don't think the market believes they will continue to have outsized growth.
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Re: Canadian Banks

Post by Taggart »

I remember reading years ago an investment pro saying that banks always look cheap in regard to P/E. I tend to agree because that's basically what I've seen over the last few decades as well. I haven't got a clue whether banks will continue to do well in the future. All I know is I own six large Canadian banks and I don't know which of these banks will continue to do well, and which won't.

I remember years ago reading in "Where Are The Customers' Yachts" this line here:

For one thing, customers have an unfortunate habit of asking about the financial future. Now, if you do someone the single honor of asking him a difficult question, you may be assured that you will get a detailed answer. Rarely will it be the most difficult of all answers – “I don’t know.”

-------------------------------------------

Sorry, but the above is the best answer I can give.
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Re: Canadian Banks

Post by SQRT »

AltaRed wrote: 21 Apr 2017 11:01 Are our bank P/Es really at a discount to the 'global' banking market, i.e. comparing banks to banks? FWIW, I think bank financials are too opaque to really know what is going on and don't warrant more valuation given the 'trust me' nature of their business. FWIW2, I have 4 of the big 5 in my portfolio so it is not as if I am knocking them. I just don't think the market believes they will continue to have outsized growth.
Tend to agree. The CDN banks trade at generally higher PE's than US banks but this is probably because our ROE's are quite a bit higher. I'm not sure it's opaqueness. More likely to be the cyclicality, ie credit cycles. In any event the market is generally right, so can't really argue.
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Re: Canadian Banks

Post by Lazy Ninja »

SQRT wrote: 21 Apr 2017 06:08 Interesting article in the G&M on Thursday (Apr 20). They looked for names that consistently beat the TSX index. Came up with 10 names and 6 of them were the big banks.
What were the other 4? Just curious.
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