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Banks (and Credit Unions) Aren’t Working For You.

It’s not an accident that regular people are unable to truly understand that financial services industry today — let me explain.

The Dominant Banks of Canada

Bank of Montreal arrived in Canada 200 Years ago (literally in 1817) and brought with them the European Banking System. Fast forward to 2017, things really haven’t changed much.

  • 70% of Canadian Assets are held with the 5 domestic banks in Canada

  • 35% of the Canadian Equity Market is represented by Bank — the second is 20% in energy companies

So basically, the Canadian Banks hold the largest share of Canada’s overall economy and also the largest share of Canadian citizen’s household assets. In hindsight, this is quite a scary fact knowing that most Canadians don’t actually know what and how banks actually function and earn money on. It would be like entrusting 70% of what you own to some stranger that doesn’t have a good reputation, but was the only guy in town that could do the job for you.

Now let’s cut to the punchline:

“The banks are in the business of lending money.”

I went through the 2016 annual financial statements of all 5 of the big banks and noted their #1 income generating products were as follows:

  • CIBC: Interest Income from Loans— $9,833 Million

  • RBC: Interest Income from Loans — $17,876 Million

  • TD: Interest Income from Loans — $21,751 Million

  • Scotia: Interest Income from Loans — $20,419 Million

  • BMO: Interest Income from Loans — $12,575 Million

Once again, I repeat — “The banks are in the business of lending money.”

So what does this mean to you?

While the banking system is a necessity in our world today, I would highly recommend you & everyone that you know to reconsider the advice that you receive from your banker. While every Canadian works hard to get out of debt, your banker is trying to put you into debt — it shows in their numbers.

If I were you, I would consult an independent financial planning professional whose compensation is not tied on you borrowing money from them and ask them for a second opinion on some of the following questions:

  • How will I be able to afford my first down payment on a home?

  • Should I pay off my student loans or invest?

  • Should I pay off my mortgage or save into an RRSP

  • What is better — an RRSP or TFSA?

  • How should I pay for the car I’d like to purchase

  • and any other questions regarding money!…

You could also consult Google … though the advice will be generic , it could be used as a guideline to an appropriate solution.

Discipline is what it takes to block out the noise, commitment is what it takes to walk the path to financial success and patience is what it takes to reach the goal.

Clement Chung, CFP, CLU

Certified Financial Planner

www.clementchung.com


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CLEMENT CHUNG, CFP, CLU

Certified Financial Planner

Fee-Based Financial Planning
Burnaby & Metro Vancouver

©2018 by Clement Chung.