Banks and Credit Unions: A Whole Array of Products
Banks and credit unions have changed radically over the last few years and become true financial networks.
In addition to basic services (savings accounts, etc.), they now offer securities brokerage, mutual funds, trusts, financing, life insurance, and damage insurance.
A Bit of History...
Ten years ago, there were 4 kinds of financial institutions in the Canadian financial system:
- Chartered banks
- Trust companies
- Insurance companies
- Brokerage firms
In June 1992, one of the all-time biggest amendments to the
Banks Act came into force and opened the door for all financial institutions to offer a full range of financial services, like credit unions have been able to since the 1940s.
Investment Products & Services
Today, banks and credit unions offer not only guaranteed investment certificates (GICs)—conventional term savings—but also a wide selection of mutual funds for individuals and companies. Their product lines include services formerly available only to wealthier clients, and they even sell the competition's mutual funds.
Money market funds, equity funds, Canadian and international bonds, and guaranteed capital funds (indexed term savings) now share the floor with complete portfolio services like wrap accounts and a whole range of indexed and variable yield deposits.
As their investment product lines expand, institutions are encouraging their staff to learn more about financial markets.
Banks and credit unions are placing more and more emphasis on personal financial planning. Their approach is to build financial plans for their clients based on personal information like age, assets, career, marital status, tax status, and estate. They also use investor profiles, based on factors such as risk tolerance and investment objectives, to understand their clients' situations and help them achieve their goals.
Securities Brokerage
When the financial services industry was deregulated, financial institutions seized the opportunity to acquire brokerage firms, which offer discounted brokerage services to knowledgeable investors who want to manage their own portfolios. Transactions can be made by Internet, cell phone, or automated phone system, or with a representative. A number of institutions also offer full-service brokerage for clients who need the help of investment consultants to put their portfolios together and make their transactions.
Trusts
Banks and credit unions have also purchased trust companies, which offer individuals and companies high-end financial and trust services, as well as their expertise in asset management and administration.
Personal trust services include:
- Discretionary portfolio management, whereby individuals entrust their investment decisions to portfolio managers, who act in accordance with a pre-established investment policy and periodically report back to their clients
- Estate and trust services (estate planning, trust administration, estate liquidation, protection plans, and individual estate services)
Business trust services notably include:
- Group pension plans
- Custom-tailored investment funds
- Shareholder plans
- Trust and custodian services
Financing
Credit unions and banks offer private individuals a variety of credit cards, lines of credit, and other consumer credit options, in addition to short, medium, and long term investment products. They grant residential mortgages and strive to offer competitive interest rates and attractive repayment plans.
For the commercial market, they provide term loans, for instance, to help entrepreneurs with startups and acquisitions, and may even work with specialized borrowers like mining, oil, and gas companies.
Insurance
Insurance products like life, disability, and damage insurance (fire, accident, various risks) are available through the institutions' subsidiaries, since the
Banks Act prohibits banks from selling these products in their own branches, with the exception of loan and travel insurance. Only cooperatives, like credit unions, are free of such restrictions.
Expanding Services
More and more, banks and credit unions are developing innovative strategies to make their everyday financial services more readily accessible and more convenient for their clients.
Much progress has been made in offering basic services by instant teller, Internet, and phone.