Banking Has Changed to the Detriment of Seniors
There was a day when seniors received above average customer service from the banks. The staff was friendly and helpful and customers were guided to products that best suited their needs. For many banks, times have changed as competitive pressures and a drive for profit has resulted in many customers receiving advice that may be more beneficial to the bank, than the customer.
I heard three anecdotal stories in the past few months of TD Bank giving advice that did not appear to be in the customer’s best interest. It should be noted that I bank at this institution and I love their staff; I just would not buy any of their investment products without seeking out potential alternatives.
The bank offers the following products and the information is current as of April 30, 2017:
TD Bank High-Interest Savings Account
Balances less that $5,000 Interest rate is zero
Maximum interest rate paid .5%
When TD advises seniors they are in a high-interest savings account, perhaps it would be more accurate to claim that they call the account “high interest,” but that refers to the name of the account, not the rate of interest paid.
Risk averse seniors are major purchasers of GICs. TD Bank only sells TD Bank GIC’s, but a higher rate of interest can be earned by purchasing through TD Bank’s sister company – TD Direct Investing. They shop the market and can normally provide a rate interest that is at least .2% higher than the rate offered by the bank. Unfortunately, customers are seldom advised to make their purchases from their discount brokerage arm. Perhaps it is more convenient for the customer.
I had the opportunity to observe a TD financial advisor help a client with their RRSP investments. They recommendations were all high MER funds and it was suggested that the risk-averse client should move into bonds. Some would disagree that moving into bonds when interest rates are expected to increase may not be the best move. Many seniors cannot challenge theses recommendations as they assume the bank is acting in their best interest. There was no discussion of low fees options such as indexed funds or exchange traded funds. The recommendations appear to work for the bank rather than the customer
Although not aimed at seniors, the bank offers a youth account for children. On the first $5,000 it pays .05%, but when the balance exceeds this threshold, the rate increases to .10%. If they increased the rate by a factor of ten to 1%, it would still be nothing special.
Bottom Line – There is no suggestion that banks such as TD have the level of unethical behaviour as Wells Fargo, but the playing field has changed. Like other businesses, banks are becoming increasingly focused on profits which is not unreasonable, except many seniors expect unbiased advice, but that is not the function of the bank. Seniors should not assume their banks offer the best rates and must be prepared to shop around.
It may make sense to purchase TD Bank shares as investors will profit from their new approach, but I would not let my elderly mother make an investment decision at this bank unless an individual with some financial acumen was there to filter the sales pitch.