Bank vs Independent Providers: Corporate Investing

Executive Summary

When setting up a corporate investment account, you'll choose between bank platforms and independent providers. Here's what you should know:

• Bank platforms: Offer convenience and integration with your existing banking, with strong brand recognition and comprehensive services
• Independent providers: Mutual fund representatives working through independent dealers (like WhiteHaven Securities Inc.) who have access to products from banks, insurers, and mutual fund producers across the entire market
• Dually-licensed advisors: Can coordinate both investment and insurance strategies, seeing the full picture from both sides to optimize your corporate structure
• Key differences: Product access, convenience, service model, and the ability to coordinate investment and insurance strategies
• Who should consider what: The right choice depends on your priorities:convenience, product access, service quality, and the need for coordinated investment and insurance strategies
• Hybrid approach: Some corporations use both:banking with a bank, investing through an independent provider, with coordination from a dually-licensed advisor

This article explains the differences, pros and cons, and how to evaluate which option is right for your corporation.

Mindset: Platform Choice as a Long-Term Decision

Before diving into the technical differences, let's think about platform choice from a long-term perspective.

Your corporate investment platform is not just a place to hold investments:it's a relationship that will affect:

• What products you can access across the market
• How easily you can coordinate with your banking and other accounts
• The quality of service and advice you receive
• Your ability to coordinate investment and insurance strategies for optimal tax efficiency
• Your flexibility to change strategies or providers over time

The Big Picture:

1. Platform choice affects product access: Different platforms offer different mutual funds, ETFs, and investment products. Some platforms are limited to their own products; others offer access to the broader market, including products from banks, insurers, and mutual fund producers.

2. Dual licensing enables coordination: Advisors who are licensed for both investments and insurance can see the full picture:how corporate investments, life insurance, and estate strategies work together. This coordination is valuable for incorporated business owners who need to optimize across multiple strategies.

3. Convenience has value: Having everything in one place (banking and investing) can save time and reduce complexity. But convenience shouldn't be the only factor:product access and coordination capabilities also matter.

4. Independence means market access: Independent providers are mutual fund representatives working through independent dealers (like WhiteHaven Securities Inc.) who have access to products from banks, insurers, and mutual fund producers across the entire market. This means they can select appropriate products for your situation, regardless of manufacturer.

5. Service quality varies: The quality of advice, service, and support varies significantly between platforms and individual advisors, regardless of whether they're bank-based or independent. The advisor's expertise, experience, and approach matter more than the platform type.

6. Coordination matters: For incorporated business owners, coordinating investment strategies with insurance and estate strategies can create significant tax advantages. Dually-licensed advisors can see both sides and help optimize your overall structure.

The mindset shift: from "I'll just use my bank" to "I'll evaluate options based on my specific needs, priorities, and the ability to coordinate investment and insurance strategies for long-term tax efficiency."

Bank Platforms: Pros and Cons

What Are Bank Platforms?

Bank platforms are investment services offered by major Canadian banks. These platforms are typically integrated with the bank's other services (business banking, credit, cash management), creating a comprehensive financial relationship.

Advantages of Bank Platforms

1. Convenience and Integration

• Single relationship: One bank for banking and investing
• Easy transfers: Move money between accounts quickly
• Unified statements: All accounts on one statement
• Relationship benefits: May qualify for premium banking services or better rates

2. Familiarity and Trust

• Brand recognition: Well-known, established institutions
• Perceived security: Large institutions may feel more secure
• Existing relationship: If you already bank there, you have a relationship

3. Comprehensive Services

• Full-service options: Some bank platforms offer comprehensive wealth management
• Multiple account types: Can handle corporate, personal, and other account types
• Additional services: May offer credit, insurance, and other services

Disadvantages of Bank Platforms

1. Product Limitations

• Proprietary focus: Banks often favor their own mutual funds and products
• Limited selection: May not offer access to all products in the market
• Potential bias: Advisors may be incentivized to recommend bank products

2. Less Independence

• Product bias: Advisors may be limited in what they can recommend
• Less flexibility: May be constrained by bank policies and product availability
• Potential conflicts: Bank's interest in selling their products vs. your best interest

3. Service Quality Varies

• Large institutions: May feel less personal
• Advisor turnover: May experience more advisor changes
• Standardized approach: May offer less customized service

4. Limited Coordination

• Investment focus: Bank platforms typically focus on investment services
• Separate insurance: May require working with separate insurance advisors
• Less integration: May have less ability to coordinate investment and insurance strategies for optimal tax efficiency

Independent Providers: Pros and Cons

What Are Independent Providers?

Independent providers are mutual fund representatives working through independent dealers (like WhiteHaven Securities Inc.). These advisors have access to products from banks, insurers, and mutual fund producers across the entire market, not just products from a single institution.

This means independent advisors can:

• Access bank products: Mutual funds and investment products from major banks
• Access insurer products: Investment and insurance products from insurance companies
• Access mutual fund producer products: Products from independent mutual fund manufacturers
• Select leading options: Choose suitable products for your situation, regardless of manufacturer

Independent advisors typically focus on investment and insurance services rather than full banking relationships, but they can coordinate with your existing banking relationships.

Advantages of Independent Providers

1. Broader Product Access

• Market-wide selection: Access to products from banks, insurers, and mutual fund producers across the entire market
• Best-in-class selection: Can choose the best products regardless of manufacturer
• No proprietary bias: Not limited to products from a single institution
• More options: Typically offer more investment choices

2. Advisor Independence

• Objective advice: Advisors can recommend products based on merit, not manufacturer
• Brand-agnostic: Can select from the entire market
• Client-focused: May be more focused on client outcomes than product sales

3. Specialized Expertise

• Corporate focus: Some independent providers specialize in corporate accounts
• Tax expertise: May have deeper expertise in corporate tax considerations (understanding SBD grind, RDTOH & GRIP, and tax integration)
• Customized service: Often offer more personalized, relationship-based service

4. Dual Licensing and Coordination

• Investment and insurance: Dually-licensed advisors can coordinate both investment and insurance strategies
• Full picture: Can see how corporate investments, life insurance, and estate strategies work together
• Tax optimization: Can help optimize across multiple strategies for maximum tax efficiency
• Integrated planning: Can coordinate with your CPA, lawyer, and notary to create a cohesive strategy

Disadvantages of Independent Providers

1. Less Integration

• Separate relationships: Banking and investing may be with different institutions
• Transfer complexity: Moving money may require more steps
• Multiple statements: May receive statements from multiple institutions

2. Perceived Risk

• Less familiar: May not recognize the brand (though independent dealers like WhiteHaven Securities Inc. are fully regulated and reputable)
• Size concerns: May worry about smaller institutions (though independent dealers are well-established and regulated)
• Relationship building: May need to build a new relationship

3. Service Limitations

• No banking services: Typically don't offer banking, credit, or other services
• May require coordination: Need to coordinate with your bank separately
• Potential complexity: Managing relationships with multiple institutions

Regulatory Considerations

• All investment dealers in Canada are regulated by provincial securities commissions
• Investment advisors must be registered and meet regulatory requirements
• Product availability depends on dealer registration and platform capabilities
• Always verify that your advisor and platform are properly registered

Related Articles

• Corporate Investing Services - How we help structure corporate investment portfolios
• The SBD "Grind" & Your Corporate Portfolio - Understanding tax considerations in portfolio design