October 2, 2007 De Novo Banks Storm
the Federation of Canadian Independent Deposit
Brokers Conference (FCIDB)
Over 100 deposit brokers had gathered in
Montreal’s Queen Elizabeth hotel these past
few days for the FCIDB’s annual conference
(www.fcidb.com). Many de novo banks sponsored
the event in order to tout their products.
These de novo banks view the broker network
as their turf and judging by the vocal appreciation
from the brokers on hand and also individuals
from one of the big banks that was present,
they appear to be correct in their understanding.
Mauro Grande, a Advisors Advantage Trust
(BMO) says the new banks are ‘smart’. He acknowledged
Bank West and General Bank among the many
newcomers (two microscopic de novo banks that
are not normally on a big bank’s radar). BMO
only offers Guraneed Deposits to brokers,
so Grande recognizes that the needs of many
people can’t be served by BMO. As he says,
“It’s the same at most of the big banks.”
Some of the de novos attending or sponsoring
the event included Bridgewater Bank, Bank
West, Canadian Western Bank, Dundee Bank (recently
acquired by Scotia Bank), General Bank, Pacific
and Western Bank (PW Bank) and State Bank
of India (Canada)..
Manulife, the largest of the de novo banks
did not sponsor the FCIDB event, but coincidentally
they were holding their own event across the
hall. According to Susan Alexander, a certified
financial planner with Sholdice Financial
Services (assets $22 million) and attending
the FCIDB event, “Manulife have perfected
a formula of working with brokers.” Running
89 similar events each year is one component
of their strategy.
Other factors driving Manulife's success
is, in part, due to one of its products that
is used by Alexander and many other of the
broker's clients. This is The Manulife Advantage
Account. In Alexander’s case, she often aims
this product at service clubs (charities,
schools, teams etc.) that have $20 - 30,000
dollars in funds but only use the money one
or two times annually. The advantage account
pays 4% interest and the funds are available
when clients need it, and there is no minimum
amount. ‘Why would anyone put their money
in a regular savings account earning nothing
when Manulife can put hundreds into their
pocket with very little effort and no risk?’
What Alexander also appreciates is that in
addition to offering a product her low maintenance
clients love, Manulife pay monthly commissions.
She prefers this to ING that only pay quarterly
and are sometimes ‘hard to deal with.’
Alexander likes working with the Western
Banks too. In particular, Bridgewater Bank,
which offers niche products and exceptional
service, “After all, it’s all about relationships.”
Lynn Forgrave, President of Foregrave Financial,
echoes Alexander’s sentiments. He points out
that although a lot of work these days is
done through email, it is still a service
oriented business. This point was made very
clear at Bridgewater Bank’s private event
geared to give them the opportunity to show
their appreciation for dozens of their most
cherished brokers. They even gave one lucky
broker an all expense fly-fishing trip to
Alberta.
Bridgewater, spun out of the Alberta Motor
Association (AMA) is a great example of one
of the companies present that is attempting
to leverage their client base in order to
generate critical mass. Some observers would
not be surprised to learn that one or more
of the Alberta association’s sister clubs
(CAA & provincial automobile clubs with
about 4 million members across Canada) decided
to join the Bridgewater parade. Bridgewater,
with one of Canada’s and the world’s most
envied loyalty programs, a card based membership,
national credit cards, insurance and car financing
programs solidly in place, all together substantiates
BMO’s Grande thinking that the de novos are
‘smart’ for starting banks.
Meanwhile, back at the trade booths, brokers
had the opportunity to meet the individuals
behind the de novos, including PW Bank. PW
bank is another successful de novo. PW Bank’s
impressive growth demonstrates the potential
for smaller players to fill the gaps left
by the big banks. The story of PW Bank began
in Saskatchewan when a failing Saskatchewan
Trust ($20 million assets) was taken over
by David Taylor and a couple of investors.
This small trust was granted its banking charter
in 2002. According to Taylor, “PW Bank was
the first branchless financial institution
in North America, the first bank to gain a
charter in Canada since 1984 and one of the
first entirely broker based banks in Canada.”
With only 60 staff, comprised of more software
developers than lenders, it has turned an
original asset base of $20 million into a
comparative colossal $1.4 Billion in assets.
Not all de novos at the event were appreciated
as much as PW Bank and Bridgwater though.
ICICI Bank, India's second-largest bank with
total assets of Rs. 3,446.58 billion (US$
79 billion) and the recently sold Dundee Bank
were both frowned upon. According to several
brokers, ICICI in particular seems not to
get the message about building relationships
and providing good service. Despite offering
brokers attractive interest rates, they have
not performed in the Canadian market. As BMO’s
Grande says, “Good rates are table stakes.”
This sentiment was also reflected in the words
of a broker when Alexander made it clear that,
“It is not always true that if you have the
best rates you will get the business.” Perhaps
ICICI are content to use their bank charter
to provide highly profitable remittance: a
global industry valued in excess of $250 billion
US according to a BankNews.TV interview with
Peter Crear, CEO, World Council of Credit
Unions (WOCCU).
Dundee Bank, do not seem to have such an
excuse. Notorious for underperforming they
were event sponsors, yet they managed to keep
a very low profile. Recently sold to Scotia
Bank, Dundee is one organization that seems
to have done just about all the wrong things
in their drive to break into the banking arena.
Never-the-less, even a failing Dundee Bank
has proven to be of significant value to Scotiabank
who recently spent $608-million to buy the
banking operations of Dundee Corp, a move
geared to help chief executive Rick Waugh
deliver on his promise to enhance the bank's
retail brokerage division.
At the end of the FCIDB event, and after
hearing comments from many of the brokers
present, it is clear that the most significant
de novo was actually across the hall. Manulife
Bank demonstrate all the things a de novo
should be in order to be successful. They
provide the market the products it wants,
they offer good service and attention to relationships:
all components in its ‘marketing magic.’ Clearly
Manulife also knows its sweet spot: the bank
does not offer retail banking and is still
growing faster than any of the big banks.
With almost unanimous appreciation by its
brokers, the success of Manulife is clearly
reflected in its numbers: 2006 its total assets
rose 34 per cent to $8.3-billion. That's up
from $1.6-billion five years ago, and from
$4-billion in 2004. According to a recent
Bloomberg article, Manulife Bank’s profit
was about $50-million in 2006, making up roughly
5 per cent of Manulife earnings in Canada.
Not bad for a de novo and great for Canada’s
independent deposit brokers.
For more information contact:
Margo Legault
Event Sales
514.671.0208
margo@banknews.tv
