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Aggressive selling by banks? The answer’s in the fine print

Bharat Masrani is doing the right thing by calling in outsiders to help evaluate whether Toronto-Dominion Bank is abusing its own customers. The problem is that he could do far more.

The bank's chief executive is, of course, responding to allegations in recent CBC stories that some TD employees broke rules to meet sales targets and keep their jobs. The allegations, which TD denies, invite comparison to the Wells Fargo scandal in the U.S., where employees were found to have made up fake accounts in an effort to hit internal targets.

In response to the concerns, Mr. Masrani announced last week that he has hired an unnamed, external firm to assist the bank in reviewing its own behaviour. It's a good move.

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Read more: Is your bank trying to upsell you? Here's what you should – and shouldn't – buy

But here's a question for the TD bank boss and for his counterparts at other institutions as well: Why do you have to wait for an outsider's input before reforming your sales culture?

Hiring outsiders has a way of suggesting that any possible abuses of customer trust must be hidden away in dark corners of the bank, and require trained investigators to ferret them out.

That may be true in some instances, but at TD – and at other Canadian banks – you do not have to dig deep to spot instances where customers are not being well served.

With all due respect, Mr. Masrani, you just have to look at your own website. Consider the eye-grabbing headline that tops your home page: "Earn up to 9.00% with a 3-year TD Canadian Banking & Utilities GIC."

In this age of ultra-low rates, a 9-per-cent return sounds hugely attractive. Too bad that a client has to click on a link to find out that 9 per cent is the total potential return over three years, not a single year.

Now you can claim the bank is not deliberately misleading anyone. It does, after all, mention three years when citing the potential payoff.

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The problem? Nobody, in my experience of financial history, has ever made a practice of quoting returns based on totals over three years. The assumption is always that a quoted return reflects a one-year rate.

If the bank truly believes in how it is billing the potential return on its GIC, it should apply the same logic to advertising its mortgages: It should tout a three-year, 3-per-cent mortgage as one with a 9-per-cent rate.

What's that, you say, Mr. Masrani? You don't see the appeal of this approach? Yep, I can understand why. But let's strive for a modicum of consistency here. You can't argue that it's fair or consumer-friendly to present rates one way when it benefits your sales pitch and another way when it does not.

To put things bluntly, advertising a potential 9-per-cent return on a three-year GIC strikes me as being a blatant attempt to mislead some of your more numerically unsophisticated investors.

But let's move on, shall we? Maybe I'm not in the market for one of your GICs but would simply like some help saving. In that case, I might turn to your Account Selector Tool to help me choose the right vehicle.

If I do so, I discover that the TD High Interest Savings account is supposedly the perfect vehicle for my needs. It offers, in your words, a "high interest rate, calculated daily on balances of $5,000 or more."

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Why, that sounds perfect! My only question is what high rate you're prepared to lavish on me. To answer it, I have to dig a bit. The answer, it turns out after a couple of clicks, is 0.50 per cent a year.

Now, Mr. Masrani, you may have wondered what that high-pitched keening noise is in your office. I suspect it's the sound of the English language being tortured in special cells beneath the TD Centre. There is no way 0.50 per cent constitutes high interest in any normal usage of the term.

But maybe that's just nitpicking. A quick wander around your bank's site shows some praiseworthy features (prominently displayed management expense ratios for your mutual funds) and a lot of things that could be far better (a retirement calculator that, rather astonishingly, makes no mention of Canada Pension Plan and Old Age Security).

It's a site that peddles every type of product imaginable, from gold to overdraft protection, with only a cursory sprinkling of consumer information. To be sure, nobody expects a bank to be a charitable institution, but for an institution that likes to portray itself as a trusted adviser, it seems severely lacking.

Mr. Masrani, I know you're eagerly awaiting the feedback from your outside investigators. But there's a lot you could do, right now, to make things better.

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About the Author

Ian McGugan is a reporter with The Globe and Mail's Report on Business and has been writing about investing, economics and business for more than 20 years. He joined the Globe and Mail in 2010. He has been executive editor of Canadian Business magazine and founding editor of MoneySense magazine. More


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