I have been dealing with my bank for decades and most of my financial products are held there. Yes, I know that I could get a higher interest rate on my savings account, or a lower trading fee on my discount brokerage if I switched. I think about it for a minute or two, and then move on to something else.

Most Canadians by and large do feel very comfortable with their financial institution and have a great degree of loyalty.

At the bank that I was employed with for many years, we worked hard to achieve that loyalty. Our mandate was to sell as many products as possible to each customer. We arranged direct deposits and automatic debits to make banking easy. The theory here is that the more products you have, the less likely you will be to move on to somewhere else.

Related: My loyalty never got me a free 42″ TV

A common misconception is that you will receive the best rates and multiple perks if all your banking is at one place, but that is not necessarily true. The bank interprets your loyalty as making you less price sensitive. While I did have some leeway in negotiating, we did have rock bottom pricing policies that did not always match the competition.

The assumption was that our customer service was so fantastic, why would anyone want to leave? And, you know what, I must have been fantastic, because very few people did.

Me: “I’m sorry, I can’t match the rate you were offered by ABC bank. The best I can do is “x” percent. But, I can give you three months of free chequing.”

Customer: “Okay, that sounds great.”

Why are Canadians so loyal to their bank?

Why are we so loyal to our bank?

We have a cognitive bias about choice. When we choose something, we tend to feel positive about it, even if that choice has flaws.

We believe it will be too complicated and take a lot of time and effort (perceived pain) to switch.

Investors stick with their advisors – and may not mind paying extra fees – because it adds a level of comfort. It can be intimidating to research other options, or even strike out on our own with an on-line brokerage.

A CIBC survey showed Canadian investors are often fearful about adjusting their general investment approach and continue to invest with who and what they know best.

Will this change in the future?

According to a survey by Yahoo Finance:

  • 19% of Canadians switched banking providers/advisors in the last 5 years.
  • Millennials are more likely to switch – 29% – with many moving to on-line providers.
  • New Canadians have the least loyalty, with 39% making the switch.

Those are not high percentages yet, but the time is coming when the big financial institutions will have to stop being so complacent and start making the changes that their customers are beginning to want.

While Canadians have traditionally been loyal when it come to financial services – sticking with a bank or advisor for years regardless of the quality of service – younger generations are becoming more demanding and price conscious. They don’t have the same allegiance shown by their parents and grandparents.

Final thoughts

There is something off-putting about change – whether it’s your bank, investment advisor, service provider, or even your doctor and dentist.

Good service and advice is always invaluable, even if you have to pay a little extra for it. But, there may be better options available out there for you.

In fact, I’m going to take my own advice and check out some alternatives. Although, I’m kind of busy right now. Maybe I’ll wait until the New Year…

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9 Comments

  1. Lynda Williams on November 23, 2016 at 8:26 am

    I opened a tangerine account and a PC financial account with the hope of switching out of TD Canada trust as I’m tired of all the fees. I still can’t pull the plug as I’m not sure what will happen with all my rrsp’s and the resp’s at TD Waterhouse. I’ve tried talking to one of their reps but every time I go in they say they don’t have anyone qualified to answer questions about the Waterhouse division. Don’t get me started on the run around I get trying to cash in some of the RESP held with Waterhouse.

    • DrDebt on November 23, 2016 at 8:46 am

      Lynda, talk to an independent Financial Planner (outside of the bank), they can answer your questions and can manage your investments for you 🙂

    • boomer on November 23, 2016 at 5:14 pm

      @Lynda. Once you decide on a FI you want to switch to, you just have to open new accounts with them and complete the transfer forms. They will take care of the rest and often will reimburse you any transfer fees. It’s as easy as that.

    • igra on December 18, 2016 at 9:49 pm

      I’ve made the switch to Tangerine chequing account soon after it was launched. I still have my RRSP and RESP accounts at TD. But I don’t have a chequing account at TD. I can contribute to RRSP and RESPs from my Tangerine account without problems.
      Having a chequing account at TD is not a prerequisite for any of the other accounts (RRSP, RESP, etc) at neither TD Bank of TD Waterhouse. You can link everything to a chequing account at another institution.

  2. gary on November 23, 2016 at 8:56 am

    i’ve been with my bank for over 40 years. i’m sure i could get a better deal elsewhere but the relationship and trust that you build up over those many years has an intangible value. i guess i’m stuck!

  3. KC on November 23, 2016 at 9:21 am

    I left TD many years ago due to them nickling and diming me every time I turned around. I was even charged $1 just for talking with a teller (no transactions made). Keep in mind that I had no job at the time and I was supposed to have been grandfathered in from Canada Trust meaning at least another 2 years of free banking. Yeah, it was a rough transition.

    I switched to PC and never looked back.

    I deal with TD through charities that I’m the bookkeeper for and the amount of hassle in getting things done (missing documents, waits until 2 weeks to send things to HQ only to be told that we needed something else, etc) only convinces me to continue to stay away from them.

  4. aB on November 23, 2016 at 10:20 am

    I’ve been with RBC, for a long while, also with PC financial. Also have a dormant Tangerine account.

    I don’t pay fees on anything.
    One thing, I find people don’t do is, split your pay cheque.
    I only have a small amount going to the RBC account, and the rest goes to the PC financial. [With kids, those free cheques add up.] So if I need, RBC is there, but most of my stuff is now moved.

  5. Dee on November 23, 2016 at 8:49 pm

    I had a similar experience. I am now retired and while I was working I worked for the major financial institution. Back in the days, I was able to visit my branch on my way back from data center and deliver some work that missed dispatched. Folks knew me and I knew them and we had a relationship (felt like that). After that Banks strategy changed and they started to shift Bank managers around and start closing branches and start exploring certain major centers (one way of letting people go). I knew no one and started to divert more towards online banking. My account was assigned to someone I never heard from or off. I consolidated my accounts across multiple banks to TD Canada trust because of in branch service I received. After couple of years I went back to the original bank to close my account. Bank manager wanted me to tell her the history and assigned someone to assist me and convince me not to close the account. I gave some time and effort to exchange thoughts and see if it fits my requirement from what they were selling. There are two offerings depending on the size of portfolio. Needless to say, their services did not meet my needs as they are just some fancy packaging over the same old product. With my TDWaterhouse I am begining to find new incentives to new customers but the loyal customers don’t get the same offerings which makes me bad and I had reported this two consecutive years during their promotion period. I got something when I reported to my branch manager. You should not sit back but speak up and will get something out of their promotion incentive for new customers. So, the banks needs to demonstrate their loyalty to existing customers before expecting the same from customers.

  6. Duane Backer on November 24, 2016 at 6:01 pm

    I have switched financial advisors and investment firms a couple of times as I got smarter about investing. I have also switched from BMO to another bank when I got a better mortgage deal there. At the time my all in one account had no fees. Since then they have introduced a fee over which I asked them if it was more important to keep my account or take care of the fee. I am still there… I had also switched my credit card. While I am happy with their rewards program I am not impressed with their transaction download platform and how I am unable to do a regular reconciliation in Quicken. I brought this up with them and we came to a resolution where I get the equivalent of the annual fee until they get the issue fixed. Some banks can and will waive or find ways to waive fees if your business is worth it to them and they know you are serious about switching!

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