Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Retail Investors are just collateral damage (again)
Fair Canada | Sep 15, 2021
The three banks (RBC, TD Bank and CIBC), according to recent media reports, have decided to stop selling “third-party” mutual funds to segments of their clients in their bank branches.
This was in response to the “know-your-product” (KYP) rules, a component of the client focused reforms.
How can the three banks justify this move?
They say it’s because under the new rules starting in 2022, employees in local bank branches who hold themselves out as financial advisors will have to know and understand the mutual funds they sell to clients.
Apparently, it is too much work to train their advisors to understand mutual funds offered by other banks or manufacturers before selling them. So, to make it easier to comply with the know-your-product rules, they will simply limit choices available to their clients.
See: Retail investors are becoming more than shareholders
Their decision is deeply disappointing. These banks are flying in the face of the spirit of the client focused reforms. By limiting customer choices in an apparent attempt to reduce their know-your-product compliance obligations, they are putting their own interests ahead of their clients’ interests.
This is ironic, given the countless public commitments by these banks to put the client first in everything they do. Their statements below now ring hollow:
- “Our purpose of helping make our clients’ ambitions a reality is our north star” (CIBC).
- “Client First: We will always earn the right to be our clients’ first choice” (RBC).
- TD Bank’s “shared commitment” to “think like a customer”.
Some commenters have suggested that banks are pulling back third-party mutual funds to further entrench their already dominant market share for mutual funds and increase their fee revenues. Others say it’s no big deal since only a small number of clients will be affected. But it does matter because it hurts investors, who will have fewer choices available to them. It may also lead to higher or additional costs for clients who may choose to switch banks down the road.
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