Wealthsimple estimates about $500-million in incoming transfers have been stuck in transit during the one-month strike, which has been put on hold by the Canada Industrial Relations Board so talks can continue with workers on the job. Canada Post vehicles sit covered in snow at a distribution facility in Ottawa on Dec. 13.PATRICK DOYLE/The Canadian Press
The cost of the postal strike is in the millions of dollars for people trying to move their investment accounts to another company.
Be mad at Canada Post and/or its employees if you like, but the real culprit here is the selfishness of some investment companies. Get this: A significant number of them still use cheques and faxes to move a departing client’s account to another firm. Using the technology of previous centuries says a lot about a company’s respect for investors and their right to access their own money.
Wealthsimple estimates about $500-million in incoming transfers have been stuck in transit during the one-month strike, which has been put on hold by the Canada Industrial Relations Board so talks can continue with workers on the job. The mail is expected to start moving again on Tuesday.
Meanwhile, both the S&P/TSX Composite Index and the S&P 500 have been pushing higher. Their gains would have generated $4.5-million for incoming transfers that were stuck on the sidelines instead of being funnelled into new accounts and then invested in the markets, Wealthsimple claims. The company is a relatively small segment of the investing industry, so the total amount of gains people lost out on would be far higher.
Wealthsimple shared these numbers to cast itself as a nimble financial company competing against cheque-wielding dinosaurs. Mission accomplished. The idea of financial companies sending each other cheques would be laughable if it weren’t so common.
About 35 per cent of all transfers received by Wealthsimple are completed by fax, mail and cheque. That’s down from 50 per cent in 2022, but still a high number in an age when e-transfers allow mere mortal bank customers to send money to each other in minutes.
Electronic transfers received by Wealthsimple increased modestly during the strike – by about 5 to 10 per cent. The inference here is that some companies that could have handled transactions electronically were using cheques instead.
The continued use of old tech to move money reflects the fact that some financial companies are stuck with what they themselves refer to as “legacy computer systems.” Flogging these systems to improve their productivity requires extra effort.
Why should financial firms improve the efficiency of systems used to help their customers move to a competitor? A simple answer is because it’s the client’s money. Using cheques and faxes in an electronic age seems almost spiteful, but perhaps also profitable. Delaying transfers using a cheque means money remains on the issuing company’s balance sheet longer and thus theoretically available to earn interest or lend out to clients.
With some pushing by regulators, the investment industry has become noticeably more client-friendly in recent years. Improvements include clearer language and better disclosure of need-to-know facts. But there is still resistance to the idea that there is a sanctity to client money – you can see it not only in slow account transfers, but also in unclear reporting on fees and returns.
Regulators are at least in the game as far as enforcing minimum standards for disclosure. But they need to go harder on standards for account transfers, starting with setting a deadline for all players to use electronic means to transfer accounts.
Stronger standards for the timeliness of transfers would also be helpful for the broad investment industry, including brokers and mutual fund dealers. Right now, there are service guidelines like the voluntary code the Canadian Bankers Association has for registered accounts. Account transfers are supposed to be processed in seven business days normally and 12 days in the peak season from Feb. 15 to April 8.
Mailing cheques makes it harder to comply with these standards, and it’s also out of step with society’s embrace of electronic payments. While they still accounted for about 24 per cent of the value of total payments in Canada last year, the overall number of cheques fell by 6 per cent on a year-over-year basis and the number of personal cheques dropped 18 per cent.
Having postal workers back on the job will get those gummed-up account transfers moving again, but Wealthsimple expects it will take several weeks to clear the backlog. The annual rush to contribute to registered retirement savings plans and tax-free savings accounts will be under way by then, with more cheques in the mail.
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