Thomas Flynn, the Chief Financial Officer of the Bank of Montreal stated, “Customers are increasingly doing things in a digital way, either mobile or online.”

That’s certainly true. Banks are complicit in shifting their clients to digital banking. When you next visit your bank, you will likely meet a cheerful individual just inside the door who will be happy to assist you in learning the convenience of banking through the ATM, or help you discover the magic of banking anywhere in the world with your mobile unit.

Those of us who feel technically savvy will breeze on by, but we’ll give a nod of approval to this person. Others who would like a little assistance with the technological aspects of hands-on banking will appreciate the thrill at of independence and personal power such mastery brings. All this wonderful technology provides us with expedited services that saves us time and money.

But at what cost? MIT academic Erik Brynjolfsson foresees dismal prospects for many types of jobs as powerful new technologies are increasingly adopted not only in manufacturing, clerical, and retail work, but also in professions such as financial services.

The shift towards automation means less service people are required. That’s having a big impact on job security for bank employees. BMO is anticipating laying off over 1850 staff members over the next year on top of the over 650 last year. Scotia Bank has terminated the employment of over 1500 staff and CIBC has started the process with 500.

The realignment of services and costs taking place throughout the Canadian banking industry towards service automation and the resulting layoffs will theoretically help banks address their bottom lines. That makes bank shareholders happy and justifies the high personal earnings of CEO’s who are dedicated to bringing their respective banks up to speed. In the bank management culture, a positive impact on the bottom line is deemed crucially important.

And while we might feel a momentary pinch of guilt when we realize our lessened need for that congenial teller manning the counter will cost someone their job, our guilt may well be dissipated when we smugly realize, our increased personal proficiency with banking technology will allow us to avoid those tedious line ups for the counter.

However, there are greater issues at stake that are necessary to understand for the protection our financial well-being. The problem is not simply technology and the savings generated through offloading banking administration to do-it-yourself clients, it is also a reflection of the health of our Canadian banks and how robust their service can be.

Jim Shanahan, senior analyst for Edward Jones, states “The banks are responding to a very difficult loan growth and revenue growth environment by getting a lot more aggressive with expenses.”  He goes on to discuss how Canadian banks are currently over-exposed to oil patch loans and residential mortgages. Investors are increasingly betting against Canada’s financial institutions as growing evidence suggests our country’s biggest banks “recently considered among the safest in the world – are now struggling to grow their earnings”.

Lack of bank earnings are compounded by record high Canadian indebtedness across the country which has substantially slowed the growth in new loans, despite historically low-interest rates.

So the issue becomes, How does all this affect the well-being of the bank’s investment clients?

Layoffs in the banks are across the board. That means front end staff, senior executives and consultants. Within this group of consultants are a large number of financial advisers – the individuals who are responsible for providing sound financial advice to clients.

Scotia Bank just released advisors who were earning less than $150,000 per year. Within the banking system, all advisers are subject to personal performance assessments which are based on the development of new clients and selling bank products. These assessments do not consider client satisfaction but are based on quota sales of bank products.

In practice with Scotia bank, clients with assets in excess of $750,000 are being taken away from advisors with low-performance assessments and are being given to higher producing bank representatives. Those clients with assets of less than the $750,000 are being added to a general pool of investors to be serviced by staff advisers; notably with less training, experience, and expertise. The continuity of service, or more importantly, a consistent relationship with an adviser who understands your specific circumstances is essentially lost if you fall under the $750,000 asset ceiling. It’s quite possible your investment inquiries will not even be served by the same adviser twice.

Most clients rely on a trusted professional with a comprehensive understanding of the changing complexities of our financial needs. Perhaps we’re going to need more than a 1-800 number and a faceless website to ensure our future financial welfare?

If you have any questions or comments in this regard or require clarification, please feel free to call.