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Watch Out, Industry Lies. How to Protect Yourself

Recently Erica Johnson, a CBC Investigative Reporter for their Marketplace segment has been investigating and looking into the claims of the Big 5 Banks in Canada.  She has written three articles in the last month that all clearly indicate that the banks only look out for themselves. 


7 March she published a piece on banks pressuring their employees to meet sales targets and the employees doing anything to meet these goals.


29 March she put out an article describing the terms Advisor vs Adviser and how the banks are misleading us with deceptive job titles.


17 April she interviews two bank employees that no longer work at the banks because of the situation the bank placed them in and the way that the bank wanted them to treat customers. 


Clearly, the banks have been getting some bad press over the last few weeks but they deserve it.  I can relate to what the two employees who went public in the article above had to say.  Scotiabank always pressured me to take advantage of customers whether it was investing mutual funds or setting someone up for a credit card. I never did what I thought was wrong though and eventually it lead to me parting ways with the bank back in 2002.


That experience has had a lot of influence on the way I do business now in real estate.  I always found the bank's practices unethical and the pressure I received from Scotiabank to not look out for customers and to look out for the bank interests first was stressful.  These past experiences at Scotiabank have helped me to develop my business religion of putting clients first. I believe I learned valuable lessons while at Scotiabank.  I witnessed what was taking place there and it has helped me understand that the path to long term success is in placing the interests of clients first and making sure that they are taken care of.


My experience working at Scotiabank


Similar to the person being interviewed by CBC I used to work at Scotiabank too.  I used to be a Senior Personal Banking Officer (now called Financial Advisor, a totally misleading job title at Scotiabank) at the call centre inHalifax.  I took inbound calls and was forced to make outbound calls for the bank.  What the interviewee in the story above talks about, getting in trouble for not looking out for the bank's interests first is exactly what I experienced.  The interviewee said:


He says he was also pressured to sign customers up for Scotiabank credit cards when they already had debt on other cards — a practice he says contributes to the problem of Canadians struggling with mounting credit card debt.


I was definitely pressured to do the same thing but what I actually got in trouble for was closing high interest rate credit card accounts.  When I had to make outbound calls to Scotiabank customers and push new credit cards on them I would always suggest the card with the lowest interest rate, then if they wanted me to, I would switch the customer to the new card and close the old card with the higher interest rate.  Statistically, within a short period of time if that card is not closed the customer will have 80% of the balance used up again.  The bank knows this, they're the ones that told me thinking it would encourage me to keep the credit card accounts open! 


Instead, I would offer value to the customer, offer them a lower interest rate credit card and then close the old card.  Guess what?  That didn't go over well, the bank was upset that I was


a.  switching the customer's balance to a lower interest rate credit card and

b. closing the original card the client owned, knowing they would just rack a balance up on it too.


At the call center our calls were recorded and monthly you would sit down with your manager and review your phone calls.  I would routinely get in trouble for putting the interests of the bank's customers first and not the bank.  Over time it did not work out at Scotiabank, the bank really didn't want me there because I wouldn't take advantage of customers and I didn't want to work there anymore either because it seemed all they wanted me to do was take advantage of customers.


As a Personal Banking Officer my sales quota for the first year was 1 million, I was well beyond that about halfway through the year when I left the bank, somewhere close to 4 million.  My manager couldn't understand how I was so far ahead of everyone else on our sales team, in hindsight I am going to guess it was because I was providing value to the customers and looking out for them.  I would call and offer them a credit card with a lower rate, then move their balance over to that credit card. Routinely, the conversation then focused on how else I could help them.  Maybe if the other bank employees were encouraged to do the same thing Scotiabank would actually be farther ahead in the long run.  Taking advantage of people, racking up customer's credit card debit is a short term mindset, just trying to make the next sale is not the way to long term growth.


Leaving Scotiabank was one of the best decisions that I ever made, it was a stressful time, literally only a few months before quitting I had just bought my first house, I was 22 and had no real plan in place other then to not work at Scotiabank anymore. I knew that I could not continuing working in that environment.  It was mutual, the bank didn't want me either, I wasn't taking advantage of customers and being monitored every second of my shift is not something that works well for me and it showed.


When asked for comment, Scotiabank didn't address the allegations, but said it's proud of its employees "and their determination to put our customers at the centre of everything they do."


This was Scotiabank's comment in the Go Public CBC article; I just don't believe it.  This is not what I experienced working at that bank at all, the bank only looks out for themselves and shareholders


How does this compare to real estate


The banking system sometimes can be misleading, with misleading job titles like we saw last week and whistler blowers from the banks coming out this week stating that the bank is intentionally looking out for it's interests first. This clearly shows that having someone looking out for you is important because you are intentionally being deceived to think that it is naturally occurring.


Fortunately, in the real estate industry a Realtor has fiduciary duties that are owed to their clients.  When a client and a Realtor begin working with each other the Realtor is obligated to show you the Consumers Relationships Guide and explain their fiduciary duties to you.  Here are the fiduciary duties that a Realtor owes their clients:


1. Undivided loyalty The agent must act only in your best interests and put them above their own and those of other people. The agent must avoid conflicts of interest and must protect your negotiating position at all times.


2. Confidentiality The agent must keep information confidential, even after your relationship ends. Confidential information includes your personal information, information about the property, and information about the transaction (except information the law says must be disclosed or information you agree to disclose).


3. Full disclosure The agent must tell you, in writing, about the services they will provide. They must also tell you everything they know that might affect your relationship or influence your decision in a transaction, even if they don’t think it’s important. This

includes any conflicts of interest, for example when they act (or are planning to act) on behalf of any other person in a transaction. The only information they can’t give you is confidential information from another agency relationship.


4. Obedience The agent must obey all your lawful, reasonable, and ordinary instructions. If you insist on something unlawful, the agent must refuse and consider ending your relationship and the agreement.


5. Reasonable care and skill The agent must exercise reasonable care and skill in all their duties. They must meet the standard of a reasonable and competent member of the real estate industry.


6. Full accounting The agent must account for all money and property they receive while acting on your behalf. Everything a client puts in the care of an agent—for example, money, keys, or documents—is returned when the agreement ends.


I have written about Realtors looking out for themselves before


Using the sneaky name of advisor vs adviser in the financial industry has lead the public to believe that similar duties are owed to them when working with financial advisors but this is not true.  Sometimes we see this happen in real estate, when a Realtor is really looking out for themselves first and not their clients.  I have written about these types of situations previously.   Often the problems arise when an agent is attempting to double-end a home sale or when working with representatives of a new home builder.


1.  It happened with one of my builder clients


2.  It happened when dealing with a first time home buyer   and also


3.  When dealing with a buyer looking for a luxury inner-city home


It also just happened again with my sister in-law.


What happened at the new home show homes.


Last month my sister in-law began looking for a new home in one of the newer developments in Calgary.  She spent time at the show homes, looking at units, discussing the neighbourhood's progress and basically doing her due diligence on the neighbourhood and the builders before bringing me in. 


It's interesting to see the  reactions of the representatives for the different builders.  One builder's staff was very upset that she wanted to have her own representation and another builder was totally fine with the situation. It definitely seemed like a difference in culture between the builders to me.  One builder wanted her to do what was right for her, the other builder wanted her to do what was right for them. The two reactions were completely different, one builder was supportive of her working with her own realtor, the other was completely argumentative with both her and me.  The argumentative representatives refused to return my calls and seemed upset when my sister-in law went back to the show home.   Who would this make you want to work with?  I know that I would be more in tune with working with a builder who was ok with me having my own representation.


I have also seen the manipulative actions of developer's representatives first hand, not only when representing clients but when I have looked at new builds personally as well.  When Andrea and I were inKingston,ONthis fall for my 10th year reunion from the Royal Military College we stopped in a new development along Princess Street to check out a new tower that is being developed that interested us.  It's going to be the highest condo in Kingston, has amazing views and is located in the pedestrian friendly area of town. At one point I just had to stop the sales representative and tell them I was a Realtor.  I couldn't deal with their high pressure sales tactics anymore, it was just going too far.


What should we do when looking at new developments


Just like we discussed with the banks above builder's representatives are employees of the builders, they do not owe consumers the fiduciary duties that a Realtor owes their clients.  The builder's representatives are not bound by law to look out for the interests of the buyers, they are simply employees of the builders with likely a lot of pressure to meet quotas and hit sales targets just like the whistle blowers at the banks.


We know that these things are happening at banks, there have been over 100 people come forward to CBC to tell them what they were forced to do at the banks.  I experienced Scotiabank's draconian "bank first" policy and ended up parting ways because I could not continue to dupe customers.  To think it is not happening in other industries is naive. 


Financial advisors at banks and builder's sales representatives at new show homes are very similar.  Both play under the guise of looking out for your interests but really they aren't.  They are employed to look out for the interest of their masters, whether that is a bank or a builder.  When dealing with both of these entities we need to ensure we look out for ourselves first because likely no one else is.  Having your own representation when dealing with builders is possible, most people don't know that you can choose to have a Realtor represent you with a new home purchase just like in a normal home sale.



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