Conflicts of Interest Continue to Dog Canada’s Big Banks

We believe that every investor, regardless of how or with whom he or she invests, deserves access to qualified, reliable, and conflict-free advice. Unfortunately, that last point has been a particularly challenging one for the investment services subsidiaries of some of Canada’s big banks.

Just this past month, two US-based units of Bank of Montreal agreed to pay US $38 million in order to settle regulatory charges that they had failed to disclose conflicts of interest to their clients. According to the SEC, between 2012 and 2016, BMO Harris Financial Advisors and BMO Asset Management failed to disclose that they had invested approximately 50% of their client funds in their retail Managed Asset Allocation Program in proprietary mutual funds. This resulted in investors paying higher management fees to BMO Asset Management.

This is just the latest case of a major Canadian bank incentivizing its employees to promote proprietary funds with higher fees. In 2018, Royal Mutual Funds (a fund dealer owned by the Royal Bank of Canada) paid a $1.1 million fine to the Ontario Securities Commission for offering higher commissions to its advisors for selling the company’s own proprietary mutual funds, regardless of whether those funds would truly benefit the client.

These two cases remind us once again of the prevalence of conflicts of interest within the financial services industry. At Tulett, Matthews & Assoc. we do not have any in-house products to promote or use with our clients. We are incentivized to provide the best possible advice to our clients to help them reach their goals. Our status as an independent advisory firm allows us to provide all of our clients with advice that is qualified, reliable, and conflict-free.