Finance Committee on June 7th, 2017

[Larry Elford]

Canadians are led to believe by advertising, marketing, promises, and every message out there that they should go to see a financial adviser and they should trust the advice of that adviser and if they have life-altering events, they should check with their financial adviser. The fact is there are 120,000 licensed, registered, dealing representatives found in Canada on the Canadian Securities Administrators' search page today. There are only 4,000 licensed advisers in Canada on that same search page, so that all salespersons in the country, including when I worked in the industry, were pretending to be financial advisers. Most salespersons don't even know that, because they've never held their licence in their hand. I've never seen a copy of a financial salesperson licence nor a financial adviser licence, despite working in the industry for 20 years.

It is like asking 10 million Canadians, which is the average number of investors in a population, to trust a doctor who's not a doctor, but he did take a St. John Ambulance first aid course. That's what the banking industry does by saying “trust our advisers”. It's a bait and switch thing. The banks are pushing salespeople at their customers as hard as they can push, with 120,000 versus 4,000. That's a lot of pushy salespersons and they all have to push product. They have to push product, so achieve or leave.

“Achieve or leave” was the letter that I got in the 1980s. Achieve or leave; that letter was given to my former associates at ScotiaMcLeod last year: achieve or leave.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Mr. Dusseault, you have about two minutes.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

I want to come back to something I asked on Monday about the concept of name and shame when banks are found guilty of anything and that the FCAC should name the bank at fault more often.

If I use the food sector as an example, the last thing you want is to be named as a bad company and to have to recall products, or if you're in the auto sector, you also don't want those kinds of things and your name being in the newspapers. Do you think one of the solutions would be a recommendation to be doing more investigations, being more thorough in those investigations, and at the end of the day, making sure that the banks that are not acting in the best interests of consumers are named, and people know who they are, and they can choose which banks they will do business with in light of these investigations?

Mr. Elford and Madam Watson.

[Larry Elford]

Thank you. I'll be brief.

Since 1984 I've never seen the FCAC name and shame anyone. In fact, until I had heard about this committee, I had never heard of the FCAC doing much of anything. The official banking ombudsman, OBSI, did name and shame companies, and they got their knuckles rapped for doing that. Certain companies unilaterally fired them and said they would not deal with the official banking ombudsman. Then they went out and hired their own referees who gave more favourable opinions and did not name and shame. That's the example of the double bind that the regulators are put in. It's exactly the situation that the bank employees are put in: “Either do what we say or else you're fired.”

The official banking ombudsman was neutered, effectively fired, and the FCAC stepped in as if they could or would do that. I've been waiting for 33 years.

Thank you

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

My last question will be on the culture.

Madam Watson, in your experience, is the culture in banks really what the Canadian Bankers Association said it was, that clients were always in front of everything, before profit even? What is the culture, in your opinion, in banks? Is it profit before anything else, or is it serving clients before anything else?

[Sally Watson]

It is absolutely profit before anyone else. It certainly has nothing to do with servicing the clients, as far as I could tell from the decades that I spent with Scotiabank. I also think this name and shame is starting to happen, because I don't think any of us would be sitting in this room here if it weren't for Wells Fargo bank and the employees at Wells Fargo finally coming forward and telling their story.

I think that's what got the Canadian bank employees to come forward and start telling their stories to the CBC, and I found out about it because I'm a news hawk. I watch the CBC all the time, and I read it online, and that's how I found out about this commission. I thought that was interesting because all these people are talking about things that happened in the last five to 10 years, so I got in touch with the CBC reporter and said, “I can tell you that I was doing that 40 years ago”, and she found that to be quite shocking. I think what's shocking is how long this has been going on without anybody ever making a fuss about it. I think it's time a fuss was made. That's why I think this commission is a great thing.

[The Chair, Liberal, Wayne Easter]

Okay, thank you.

This is a committee, not a commission, Sally.

I'm going to come back to Mr. Liepert's question.

I think one of the difficulties that some of us are grappling with is what we can really do at the end of the day. I think a little over a year ago the government tried to put consumer protection from a federal standpoint into, I believe, it was the budget—I forget which bill it was. They had to pull it back because, as I think you said, Mr. Elford, there are 13 different systems in the country, and did we have the constitutional authority to do that, so that's a dilemma.

I would ask all three of you, including Mr. Buell in P.E.I. as well, if we were to make a recommendation, do you have any suggestions on where the federal government should go on this matter?

I'll start with you, Mr. Buell.

[Stan Buell]

As I said many years ago, I could not see a national regulator happening in Canada, and I still feel that way. I don't have the solution for it. I had hoped the government might be able to take action to protect Canadians in working with the established regulatory silos.

There's no quick solution, but I do think a public inquiry is in order. Right now, due to CBC's Go Public, Canadians have learned more about what's going on than they ever knew before. We're seeing in the feedback we get from the public that they are becoming more aware, and I believe government must act. It's not enough to rely upon the regulators saying, “We have codes of conduct and all these rules and regulations and we believe that investors should be protected.” It's not enough to say that. Actions speak louder than words, and you have had thousands of witnesses come forward. What you've heard from Sally today is very revealing.

I think the government must pursue this. I agree, you could have made your challenge. As I said before, I don't envy you, Wayne. You have an impossible task, but what the committee should do is make a very strong recommendation to government that we really do need a public inquiry.

The government needs to listen to some of the thousands of witnesses who have come forward. There is no doubt in my mind that most of them are telling the truth.

There is no doubt in my mind that the regulators are trying to whitewash the situation and put forward lots of fanciful words that really have no impact on protecting the Canadian public.

[The Chair, Liberal, Wayne Easter]

Ms. Watson, do you have anything you want to add, or do you have any suggestions for the committee on where it should go?

[Sally Watson]

I'd just like to say that I agree with everything Mr. Buell said. He has articulated it extremely well, and I don't think there is much more I can add. It is a great idea to have this inquiry, but the media needs to stay on top of this. The media needs to keep naming names the way Wells Fargo was named and the way this has all started with Erica Johnson and the CBC.

[The Chair, Liberal, Wayne Easter]

Mr. Elford, perhaps you could add this into your response. You mentioned the ombudsman. Can you expand on that a bit? I will admit that I find it difficult when you have an internal ombudsman working within the organization that they're supposed to police. That's not exactly an independent policing mechanism, from my point of view. Could you expand on that?

[Larry Elford]

I will. I'll quote my dear friend Debra McFadden, from LaSalle, Ontario, who says that a man cannot serve two masters, and what we have are regulators that are trying to serve two masters. They're trying to say they are protecting and fostering fair and efficient public markets and they are protecting citizens as well, and most of our regulators are only paid by those public markets. They're trying to serve dual masters and they have a dual mandate that they can't serve.

She would say, and I say—I shouldn't speak for her—establish federal investment protection bodies, which skips over the constitutional debate of whether it's in his backyard or mine, or federal or provincial, or who's in charge, because that's a Trojan Horse that leaves investors cheated for another 10 years. Establish an investor protection body that has nothing to do with financial regulation and has nothing to do with constitutional issues. It says, here's consumer protection on financial matters. Leave the regulation and the regulation argument to the guys arguing over whose territory it's in. Just protect people without letting the industry in the door saying, “We'll cover both of them. Don't worry. We have both sides of this fence covered.”

That's not working, sir.

[The Chair, Liberal, Wayne Easter]

Thank you, all.

For those who are paying attention to this issue as well, I know there have been several requests to hear from more witnesses. When we started this hearing, we wanted to limit the hearing to three sets of days, and that is what is in the motion. For those who want to have their voices heard—and I know we've been getting some requests to the clerk and to the rest of us—if you go to the Standing Committee on Finance website, the information is there. The deadline for briefs is midnight this Friday night, June 9, and I can assure you that if you do submit your thoughts in your brief, they will be read, and we will assess those comments as well. I don't think we're going to go beyond the three days, but I encourage people to get their thoughts in by way of briefs by that deadline.

On Monday we will hear from six of the major schedule I banks, as well, and then the committee will have to take it from there.

I thank the witnesses, and I thank the committee members.

The meeting is adjourned.