Evidence of meeting #100 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was employees.
A video is available from Parliament.
Liberal
The Chair Liberal Wayne Easter
I call the meeting to order.
Pursuant to Standing Order 108(2), the committee will continue its study of consumer protection and oversight in relation to schedule I banks. In the first hour and half session, we will have representatives of three banks. Welcome, gentlemen, we appreciate your coming.
We will start with the Canadian Imperial Bank of Commerce, Mr. Wambolt.
Scott Wambolt Senior Vice-President, National Sales and Service, Retail Distribution and Channel Strategy, Canadian Imperial Bank of Commerce
Good afternoon. My name is Scott Wambolt, and I'm here in my capacity as senior vice-president of CIBC's national sales and service team. In this role, I lead all national sales leadership and business management activities in support of sales performance and service effectiveness for small business and personal banking on the retail side.
Thank you very much for the opportunity to speak with you today about CIBC, our values and culture, and our efforts to put our clients first. At CIBC, we have 43,000 team members who are working hard to build trusted and long-lasting relationships with our 11 million clients. Our number one priority is to put our clients at the centre of everything we do. It's what we want to be known for, and it's the kind of client-first culture we are building. This is true at our bank, regardless of whether you work behind the scenes on our risk team or human resources team, or whether you deal directly with our clients every day. As a bank, our shared purpose is helping our clients to prosper and grow. This means getting to know our clients, understanding their needs, and making sure they get the right advice and solutions to achieve their financial goals.
It also means living our values in our everyday decisions, actions, and interactions with our clients, team members, and communities. To give you some colour on what this means, I'd like to give you a few examples. It means speaking to clients in plain language. Life can be complicated, and it is our job to make sure that financial services are made simple and easy for our clients to understand. It also means taking on our clients' issues as our own and making it right for them by providing a fair and fast resolution. It means having the right escalation processes in place so that clients or employees can raise concerns at any point and have confidence that they will be addressed.
On this note, we should be clear that while the vast majority of client interactions go smoothly and as expected, in an industry with tens of millions of clients and billions of transactions completed each year, issues will arise from time to time. Our commitment is to ensure that we have the proper procedures in place to minimize the risk of issues arising in the first place, and to identify them quickly if they do. If issues do arise, we take them very seriously, investigate them immediately, and take appropriate actions. Our approach to these issues can be captured in three key themes: our people, our processes, and our culture.
Looking at our people, we make an ongoing investment in employee education and mandate that our employees refresh their training annually. In 2016 alone, we invested over $60 million in training. We are continuously coaching our team on best practices, and provide the most current information that will enable them to best serve our clients.
Our code of conduct is also very important. It sets out the principles and standards for our team's behaviour, ensuring that our actions and words reflect our culture. It also sets out expectations and protections for employees to speak up and voice their concerns, including through confidential means. We're also working to ensure that our team is empowered to get to know their clients, understand their goals, and work with their clients to help them meet those goals.
From a process perspective, we are focused on having the right programs, measurement, and incentives in place to ensure that our team models appropriate behaviours and actions. Further, to ensure that these processes and systems are working, we have intelligent monitoring in place. CIBC is absolutely accountable for these processes and monitoring, but we also actively work with various external parties, including our regulators, as they provide oversight to our industry.
Finally, on culture, at the heart of our reputation and culture is a team that puts our clients at the centre of everything we do. For CIBC, this starts with the tone from the top. From the most senior levels, we are committed to reinforcing a culture that puts our clients first and ensuring that this is the lens through which all decisions are made.
We are also committed to building an inclusive and empowered team through a culture of employee engagement. Whether volunteering for one of our community events, participating in learning and development initiatives, or being recognized by peers and management, our culture of engagement helps ensure that we work as one team towards the same goal of putting our clients at the heart of everything we do.
To this end, in 2016 we were recognized as one of Canada's 10 most admired corporate cultures by Waterstone. Our employee survey showed that 86% of employees felt that different points of view were of value in their teams, 89% would recommend CIBC as a place to do business, and 88% were proud to be identified with our bank.
We've also been recognized by Mediacorp as one of Canada's top 100 employers for five years running, and as one of the 50 most-engaged workplaces in Canada by Achievers for the last four years. We've also been awarded “most admired corporate cultures” awards twice in a five-year span.
In closing, I would like to thank the committee members for their time and attention to this topic. We welcome the opportunity for input and discussion here today.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Mr. Wambolt.
Turning to Scotiabank, Mr. McPhedran.
James McPhedran Executive Vice-President, Scotiabank
Thank you, and good afternoon, Mr. Chair.
My name is James McPhedran. I'm responsible for Scotiabank's retail distribution network in Canada. In this role I lead the bank's regional and local branch managers and employees and oversee our branch network. I have been a Scotiabank employee since 1996.
I want to acknowledge at the outset that we clearly understand the importance of the issues before the committee. The hearing addresses foundational elements, most important being culture and leadership, and I will address both topics in my brief remarks today.
Let me start by providing you with some context on Scotiabank's operations in Canada. We first opened our doors in 1832, and today we have more than 34,000 employees in Canada, including more than 14,000 employees in approximately 1,000 retail branches. We have more than eight million domestic customers, and we annually process more than 400 million customer transactions.
To better support our employees and serve our customers, we also collect more than one million pieces of employee and customer feedback each year.
Since the focus of the hearing is sales practices, let me begin by addressing that topic directly. We engage with customers in a robust process that includes four key elements.
The first is training to ensure employees are well equipped to support customers.
Next, our customer experience model guides employees to assess customer needs and develop a financial strategy.
Third, we have a variety of feedback mechanisms to ensure we hear from employees and customers regularly.
Lastly, we monitor sales to ensure compliance with our practices.
Scotiabank branches operate such that all of our employees are focused on the needs of the customer. Our tellers do not have sales targets, and branch advisers provide customers balanced advice based on their needs. We monitor and enhance sales practices and processes on an ongoing basis to ensure we are meeting the needs of our customers, and we are confident that our practices are sound. Occasionally there will be times when we don't meet customer needs. When this happens, we want to know so that we can make things right.
I also would like to take a moment to speak more broadly about culture and trust. At the heart of our culture is a singular mission. Scotiabank was founded to help people achieve their financial goals. The values of integrity and respect have always been core to our culture. They guide our behaviour. They define us as Scotiabankers, and they form the basis for our code of conduct.
Our industry is undergoing rapid change driven by customer preferences that are altering how banking services are delivered. The nature of the relationship between banks and their customers is evolving. Of the more than 400 million annual day-to-day transactions I mentioned earlier, more than 80% now take place outside the branch, mostly through online and mobile channels. Our digital transformation is driving many benefits for customers, simplifying their banking experience and offering improved convenience, ultimately leading to higher satisfaction. The changes are also empowering for our people. Digital technology allows us to be more customer focused and to spend more time giving advice.
Advice is a foundation of our retail business and it is core to the value that we provide to customers. We also hear from employees that providing customers with advice, whether it's about purchasing their first home, setting up an RESP for a child, or planning for retirement, is a big part of what they enjoy about their jobs.
Through it all, the foundation of banking remains relationships, and the cornerstone of every relationship is trust. Regardless of how services are delivered, we have never taken this trust for granted.
We have received input from more than 700,000 customers in Canada so far this year, and our satisfaction levels are strong. In fact, the highest feedback scores consistently go to our front-line teams that our customers appreciate for their friendliness and responsive and attentive behaviour.
Let me close by saying that our people take their responsibility very seriously and that we are deeply proud of our team of Scotiabankers across this country. They embody the values of our organization, they work hard on behalf of our customers, and they do so with integrity.
Thank you for the opportunity to participate in this hearing. I hope I have been able to shed some light on Scotiabank's culture and leadership approach, and the strong and enduring values that guide our team every day.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Mr. McPhedran.
Now, we turn to the TD Bank Financial Group and Mr. Pilkington.
Andrew Pilkington Executive Vice-President, Branch Banking, TD Bank Financial Group
Good afternoon. My name is Andrew Pilkington, and I am the executive vice-president for branch banking at TD Bank Group. I was born in the U.K. and have lived and worked in Europe, South America, and, for the last 14 years, Canada. I am proud to say that my family and I are dual Canadian-British citizens. In my role at TD, I lead 22,000 employees in 1,150 branches across Canada.
I appreciate the opportunity to be here today.
The Office of the Superintendent of Financial Institutions, or OSFI, is our home prudential regulator, the regulator that oversees the stability of Canadian financial institutions by ensuring that they, like TD Bank Group, are meeting agreed standards for capital, liquidity, and leverage, as well as conducting themselves in a safe and sound manner. OSFI also interacts with all the other regulators, both domestic and international, that oversee our individual lines of business.
With respect to the consumer protection rules, of the 22,000 employees in branch banking, those providing core banking services are overseen by the Financial Consumer Agency of Canada, or FCAC. About 4,000 of those 22,000 employees are registered with the Mutual Fund Dealers Association, or MFDA, to sell mutual funds. MFDA members are licensed by provincial securities commissions, and the MFDA is the national body that oversees the Canadian mutual fund industry.
We also have TD employees in TD Waterhouse Canada who are registered with the Investment Industry Regulatory Organization of Canada, IIROC, to provide investment advice. IIROC members are licensed with provincial securities commissions, and IIROC is a national body overseeing Canadian investment dealers.
I think this is important to understand, given the scope of the federal consumer protection regime.
Now, let me turn to the matter that is before this committee.
When we first heard the media report that started this discussion, frankly, we were all very surprised and very troubled. TD has always been a customer-focused organization, with a strong track record of developing internal talent. That's not just our view—we know this from our ongoing surveys that evaluate customer experience and employee satisfaction. These findings are validated by external benchmarks like J.D. Power's consumer rankings and Aon Hewitt's study of top employers in Canada. What was reported in the media does not square with the organization that I, along with all my colleagues at TD, know and respect.
Soon after the allegations appeared, many of my colleagues and I spent time travelling the country and meeting our front-line people to talk with them face to face. There were two clear messages in the feedback I received: They told me the way TD is being portrayed in the media does not align with their experiences, and they also told me that if such problems are identified, they expect me, Andy, to stamp them out. I couldn't agree with them more.
In any large company, some challenging situations will occur that need to be dealt with. We have processes in place to monitor sales practices, detect issues, and address them if they do arise. It is our vision to be the better bank in every aspect of how we run our business, how we treat our customers, and how we support our people.
We constantly look for areas of opportunity and ways to improve, and this matter is no different. I can assure you that we are again looking at ways we can improve our processes to better monitor, identify, and deal swiftly with any potential inappropriate activity.
Our mission at TD is simple: to enrich the lives of our customers, communities, and colleagues. In our branches, day in and day out, our people fulfill that mission by welcoming customers, understanding their needs, offering them helpful advice, and enabling them to meet their own goals and aspirations.
Thank you very much.
Liberal
The Chair Liberal Wayne Easter
Thank you very much.
We'll go to the first round of questions. Mr. Fergus, you have seven minutes.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
Thank you very much, Mr. Chair.
First of all, I want to welcome our witnesses to Ottawa.
Welcome to your Parliament. It is a pleasure to have you here.
Thank you for all the comments you provided at the beginning. I have to tell you that, if we go by your comments, there is actually no reason to hold these committee sessions. I can assure you that we have also heard some other testimony from Canadians, from former bank employees, and from the Canadian agency that regulates your industry.
Lucie Tedesco, the commissioner for the Financial Consumer Agency of Canada, told this committee that FCAC staff have been asked to review banks' sales practices. She told this committee that the FCAC is “assessing whether sales targets and incentive programs are contributing to sales practices that lead to poor outcomes for consumers.”
Let me just ask all three of you a series of questions. Be very brief, if you could, because I only have a certain amount of time for you to respond.
Has your bank been approached to provide information to the FCAC in the course of this review? If so, is this review specific to the practices of the head offices of the banks or to the branches of the banks?
Second, are there mechanisms in place at the head office to monitor the practices of what happens in your branches, particularly in relation to sales targets and incentive programs? If so, can you please describe these mechanisms? If you don't have these mechanisms, can you explain why not?
Executive Vice-President, Scotiabank
Sure, I'll start.
I can tell you that the FCAC is in our office right now, as is OSFI, working on the review that we all know about. The first aspect of the review is a data-gathering exercise, which has been under way for a couple of weeks.
We owe a full pack of data to the FCAC by the end of June. I can tell you it is incredibly robust. Some of our people are saying it's the likes of which they haven't seen before, in terms of the depth and breadth of the information that they've asked for. It does include both branch and head office processes. From what I can see, it's a very comprehensive request. We have teams of people who are working night and day right now, pulling that information together.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
I appreciate that.
In response to the second half of that question, does your bank have mechanisms in place to monitor what's going on in the branches, not only at head office but in the branches?
Executive Vice-President, Scotiabank
Yes. We have a very significant process that monitors sales practices. That begins in the branch, as you talked about, in terms of next-day reviews and ensuring that the right thing is going on. Then, at head office, we look at a variety of mechanisms using analytics that look at trends, out-of-pattern behaviours, and different types of sales, as another check and balance. Third, we have feedback loops. We have a variety of feedback mechanisms for employees and customers, for ongoing customer satisfaction research or issues that customers may have.
All of these are coalesced to bring together the information that we require to ensure our sales practices are sound.
Executive Vice-President, Branch Banking, TD Bank Financial Group
Yes. In terms of the FCAC, I think they're treating all the banks exactly the same way, so there's consistency. Rather than repeat my competitor's words, I'll tell you that the exact same process is going on at TD.
In terms of head office and branch banking, in all channels we are reviewing all of them. We have systems, and processes, and support in place to make sure that we don't have sales practice issues. Similarly, we would have data analytics. We gather data around outliers if we see anything that looks out of the norm in terms of data patterns, whether for individuals or geographies. We have a procedure whereby we investigate that. Clearly, if there we see any wrongdoing, we then take action accordingly.
Senior Vice-President, National Sales and Service, Retail Distribution and Channel Strategy, Canadian Imperial Bank of Commerce
Sure, yes. FCAC and OSFI have issued comprehensive requests for information and our teams are very actively putting responses together for them.
In terms of the second question, yes, we have a number of different lines of defence, so to speak, in monitoring sales practices, including, and this cannot be understated, making sure that we hire the right people who completely understand our code of conduct and our core values and seek to embody them in everything they do.
We also hold the business responsible for ensuring that they understand what's driving their sales results. We have intelligent monitoring in place that can point out any outliers, and then the business is responsible for investigating and understanding what's driving those outliers. That's reinforced by our finance and risk teams and compliance teams that override, and their mandate is to question the business on those sorts of outliers.
Backing that up is our audit team, which routinely goes through the business at a very detailed level, ensuring that all policies and procedures are adhered to.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
I appreciate those very clear answers.
Some of the witnesses mentioned that their concern is not necessarily on the things that you would consider outliers, but that the sales incentive practices that have come to our attention through the media are so widespread that they are part of the regular system. How do you try to identify those actions in terms of the goals and incentives that you have for your sales practices? They might be part of the regular practices of the bank that lead people to try to fit clients into products they don't necessarily need. How do you try to capture that?
Senior Vice-President, National Sales and Service, Retail Distribution and Channel Strategy, Canadian Imperial Bank of Commerce
Sure. Our code of conduct is clear, but I think it starts even before the code of conduct in the tone from the top at CIBC, and that's about putting the client first in everything we do, making the right call on behalf of the client every day.
Growing our enterprise over the long term is another key component of our mandate.
Some of the sales practices that you referred to in the media are absolutely unacceptable to CIBC. If any employee feels this is being pressured on them or they observe this behaviour, they have a number of means to make management aware of this, including going to their manager. If that's not an appropriate path or they feel they would like to do something else, they can go to their one-up manager or involve their HR representative who's usually very close or on site.
Then we have a number of other escalation paths that can be completely confidential. If they feel they would like to refer something confidentially we have our confidential ethics hotline, our corporate security mailbox, and our ombudsman's office.
Executive Vice-President, Scotiabank
I think a large part of your question is about how goals are set. I think it's important for the committee to know that our goals are set in a balanced approach. For us that means that our front-line tellers don't have sales targets, that our advisers are targeted with customer experience as the foremost element of their scorecard. There's balance with the ongoing approach they have with customers, the number of customers they're meeting. The number of financial plans that they're doing sales are an element.
The other is that each of our scorecards has both a what and a how metric; what was done and how. That's where things like compliance and adherence to the code come in.
When we're talking about goals or targets, this notion of balance is very important to us.
Executive Vice-President, Branch Banking, TD Bank Financial Group
When we look at our front line and how we compensate them, the vast majority of their compensation is their base salary. A relatively small part of their compensation is variable and within that variable component sales targets are one component, but an even more important component is customer satisfaction.
We poll tens of thousands of our customers every month as they have interactions, whether it's in branches or over the phone or even digitally, and we'll ask them if they were satisfied with the advice they received, if they felt they got good service. That's the biggest component of how we reward the variable components, which is relatively small. We aim for that equilibrium, that balanced approach, that was referred to by my competitor.
Our goals are not product specific so we don't say to people in the branches or on the phone that they have to sell x number of a certain product, be it a mortgage, a credit card, or whatever. They're aggregated, and we're looking to get a real balance of what customers need—customer-centric goals—and not what products we necessarily want to sell within the bank. It's very customer focused, and it's up to the individuals in the branch to spot the needs and sell those products that fit those customers' needs.