Finance Committee on June 12th, 2017

[Andrew Auerbach]

It's very important to have the context as to what we're trying to do in branches. What we are trying to do in our branches—and I believe we're doing this well—is deepen the relationships by guiding our customers.

I want to be very clear that we would never suggest selling products that are not appropriate for the customer. That's just not consistent with who we are as a company, and it's not how you build long-term relationships with customers. I'll just describe a little what we're talking about in a branch. It's asking questions of the customers to better understand and to then be in a position to guide them with solutions that are appropriate for them.

As you know, banking can be very complicated. I know that this committee has talked about financial fluency, an area we're very strongly committed to at BMO. These are very complicated matters. Oftentimes, when we have these conversations with our customers, our customers actually didn't know there were other solutions available for them.

To take it one step further, we've talked extensively about how we measure customer satisfaction and how we want to make sure we're getting it right for our customers. They tell us very clearly in this research that, in fact, when we do offer solutions, when we guide our customers and talk about things they didn't know about, they're actually more satisfied, from a measurement perspective. This is because we've taken that interest to deepen the relationship, not to sell products inappropriately, but to better understand their specific needs.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Does anyone want to jump in?

[Kirk Dudtschak]

I'll just underscore a comment I made in my opening comments.

We have a duty to this country and to our customers. We understand that. We have a privileged position in their lives. With that comes ensuring that we do well by our clients, both in terms of helping them live their lives better today, but also in terms of helping them achieve their long-term goals. With that comes a responsibility to ensure that the advice and solutions we provide are appropriate for that customer. That's at the core of who we are.

Our vision is “to be among the world's most trusted...institutions.” Our purpose statement is that we help clients do better and ultimately thrive, and help communities develop and ultimately prosper. Those are the things that guide our actions. Our goal is to build long-term client relationships.

Clients with a chequing account have been with RBC, on average, 19 and a half years. It's those types of long-term relationships we're trying to build. Also, watch for the behaviour and issues you're calling out and that employees and clients call out when they raise concerns with us to ensure we're not only doing well by our employees, but also by our clients for the long term and for this country.

[The Chair, Liberal, Wayne Easter]

You're out of time.

Ms. Blanchet, did you want to add something?

[Lucie Blanchet]

Well, it's the same here.

The first thing our clients want, and this is clear from all of our client satisfaction surveys, is that we be relevant, that we anticipate their needs, and that we exceed their expectations. All of that is that the centre of our client-focused approach.

[The Chair, Liberal, Wayne Easter]

Thank you all.

We'll move to five-minute rounds now.

Mr. Albas.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you, Mr. Chair.

Thank you to our witnesses for coming here and explaining a little of their experiences and thoughts on this important matter.

We've had three other bank employees come in today to explain the practices. Again, we heard that there are systems and codes of conduct that need to be followed. This is something every bank takes very seriously because banking is a trust industry. It's highly competitive. There are more options available. If people don't like the colour of your new logo, I'm sure there are lots of people who would love to take their business.

That being said, I still have heard two different sets of responses. First, there are these serious allegations that employees themselves are making to different news programs. Second, there are the internal systems you speak about. I'm trying to square the two of them together. The last panel that came forward said that they take these allegations quite seriously and have revisited their approaches at their respective banks.

How do you square the allegations that have been made quite publicly by certain employees of certain banks with your presentations, with your practices that you've portrayed here today? We'll start with that.

[The Chair, Liberal, Wayne Easter]

First is Mr. Auerbach.

[Andrew Auerbach]

Thank you, Mr. Chair.

I want to be clear that we are not in any way trying to be dismissive of what we've heard. These are very large businesses. In fact, we do over 200 million interactions every single year, and while I want us to get it right every single time, we don't. What I've tried to describe is more the approach we take when concerns are raised.

Mr. Albas, you described two scenarios. One scenario was around what you've heard from employees. In this perspective, it is deeply embedded in our culture that we are constantly encouraging our teams to feel free to speak up and be candid, and we have many mechanisms in order to do so. Some of these are confidential and anonymous, if employees are not comfortable talking to their manager, or to their manager's manager, or perhaps to me.

We do have a lot of rigour around these approaches. However, from time to time, there is inappropriate behaviour. My assurance to the committee is that when these situations are identified, they are thoroughly investigated and reviewed case by case, and appropriate action is taken every time, particularly in terms of the spirit of what we are trying to do as a company.

With respect to customers, if I may just go to that side of it, we also have many mechanisms to raise concerns, both in the branch and at higher levels of escalation, which might include me or executive resolution teams, local leadership in the market, and, of course, our ombudsman for situations that we don't feel can be adequately resolved. Finally—and these are quite minimal in the nature of the overall number—there is a very clear path to escalate, as you know, to the ombudsman for financial institutions.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Ms. Blanchet, go ahead.

[Lucie Blanchet]

Our employees have several means at their disposal to express any dissatisfaction, complaint, or any breach of ethics they might witness. Of course, first there are the first level managers. At our bank, the managers are very active in the field.

In addition, we have an independent, decentralized human resources call centre. Employees may also call our labour relations sector directly. We have a corporate security sector, and a compliance sector. As a last resort, we also have an employee ombudsman.

One of the practices that makes our corporate culture different is the fact that we are very close to our employees. Since we are a smaller organization, our management meets with 3,000 to 4,000 employees a year, and has for several years. Management takes part in 300 to 400 activities directly with employees.

And so we have several mechanisms allowing us to ensure a good work climate. Employees feel very comfortable using them, mainly because when they do so we act to implement the improvements they suggest.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you.

Mr. Dudtschak, go ahead.

[Kirk Dudtschak]

Thank you.

I'll build on the previous comments. We do take this process very seriously, and we take all feedback we get from clients and employees seriously.

Through the work we have done, whether it's investigations around potential fraud, falsification of signatures, or references to selling clients products they don't need, our review has demonstrated that there is no systemic issue. They do happen periodically, and we have mechanisms in place to listen and watch for those, but it's not systemic.

I would say, though, that we use this not just to deal with individual situations, but to strengthen our programs. Over the 20 years I have been involved in performance management, our performance program has changed a lot, and it is continuing to shift more and more to a greater focus on activities, behaviours, and client loyalty to ensure that the balance we are talking about here is in place.

Our programs have also changed so that the calibration we put into the programs doesn't create the unnecessary sense that the performance objectives the employee or the team has are unrealistic. Where we find out that they are, we make adjustments to ensure that they are fair and that the basis of setting those objectives is objective.

[The Chair, Liberal, Wayne Easter]

A short one—

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Very briefly, what steps have you taken since the case of Wells Fargo came out and the FCAC decided to investigate, so that these issues are dealt with directly?

[Kirk Dudtschak]

In our case, as I said, we've always had measurement, monitoring, and calibration mechanisms in place. We have strengthened those. The review cycles that we are now doing are quarterly or monthly. We are documenting all the cases. We are documenting the investigations we do. We are running regular data analysis around the products and services our advisers are providing to customers, or the tools they're using to provide advice, again to ensure that the objectives we set are fair, but also that the client experience is what we intend it to be.

We have significantly stepped up our efforts. As I alluded to earlier, over the course of the last few years we've begun to shift our programs to ones that place a greater focus on the client experience overall.

[The Chair, Liberal, Wayne Easter]

Ms. Blanchet or Mr. Auerbach, do you have anything to add to that?

[Lucie Blanchet]

We did take actions.

We first of all carried out a self-evaluation of our own internal practices. In that context, we were very open with upper management and the board. Our management also asked for an independent internal audit of our sales practices. Of course there's always room for improvement. We don't claim that our organization is perfect. We found certain potential improvements and we are already implementing them.

[The Chair, Liberal, Wayne Easter]

Mr. Auerbach.

[Andrew Auerbach]

Certainly building on what you've heard, we have put out a number of leadership messages to reinforce what we talked about this evening. We have also worked extensively with our U.S. business, BMO Harris, and pulled the best practices and lessons that have come out of the U.S. In addition, we've strengthened our employee support tools, reinforcing the availability of the ways that people can in fact speak up. We've enhanced the monitoring of our potential sales issues, this idea of monitoring behaviours. We've increased the frequency of those reviews.

Finally, we're working very closely, as you know, with OSFI and FCAC on a quite extensive review that is quite broad across all the areas we've talked about.

[The Chair, Liberal, Wayne Easter]

Thank you all.

Mr. Grewal.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair.

Thank you all for being here today.

My questions go back through to the micro level again, in the branch, because we're here to talk about aggressive sales tactics in response to employees of banks coming forward and making allegations that they felt pressured to sell investment products or to upsell customers, even though they didn't believe those customers needed that advice or they weren't in a position to give that advice.

It goes back to a quick question at the teller level. Are your tellers paid by sales targets, or does part of their compensation involve sales targets?

[Kirk Dudtschak]

In our case, in terms of what I know is another question you'll ask around titles, our tellers are called client advisers. For the bonus portion of their pay, which is a relatively small percentage, as I referenced earlier, there are a variety of objectives in place, activity and behaviour objectives, client loyalty objectives, as well as outcomes.

An outcome could be as simple as you going into a branch and asking about foreign exchange because you're going on a trip, and they ask whether you've purchased travel insurance and then provide you with that solution to ensure that you and your family are protected on your trip.

[The Chair, Liberal, Wayne Easter]

You must operate on a different bonus system than they do around this town, because they give everybody a bonus, whether they succeed or not—not everybody, but senior managers.

[Voices]

Oh, oh!