TORONTO (November 7, 2022) – ISS Market Intelligence (ISS MI), a unit of Institutional Shareholder Services and a leading global provider of data, analytics, insights, media, and events solutions to the global financial services industry, today announced the release of its Deposit Advisory Service report covering the Canadian market for deposit products and the distribution channels through which they are sold.
The report finds that fixed-term deposits (FTDs) reached a new high of C$657.8 billion in balances during the first half of 2022, up from the previous record of C$636.6 billion in 2019. The highest inflows were experienced by the Big Six banks (National Bank of Canada, Royal Bank of Canada, Bank of Montreal, Canadian Imperial Bank of Commerce, Bank of Nova Scotia, and Toronto Dominion Bank), while online-focused deposit-takers led the way in growth at 22.2 percent of overall FTDs in just six months. In aggregate, FTDs rose by 12.0 percent in the first six months of 2022 with regular guaranteed investment certificates (GICs) up 13.0 percent, being the strongest growing product in the deposit sphere for the first half of 2022.
Demand deposit growth slowed in the first half of the year as premium savings accounts (PSAs) dragged the category down, posting balance declines of 2.1 percent. The composition of savings accounts continues to tilt away from PSAs, as their growth remained well behind both that of regular chequing and regular savings accounts in the first six months of 2022. Total demand deposits grew at 0.7 percent through the first two quarters of the year as regular chequing accounts held up the group, posting 3.7 percent growth.
Deposit distribution favoured advisor networks over branch and online platforms, the report finds, continuing the trend seen in the second half of 2021. Advisors were quick to move out of FTDs in 2021 but have been just as swift to move into the product in the first half of the year, as full-service brokerages led in net flows by adding C$20.5 billion to their books.
“The pace of rate hikes has seen increased allocation to short-term products,” said Will Stevenson, lead author of the report and Associate, Deposits and Household Balance Sheet, at ISS MI. “Advisors are booking GICs at a faster rate than other channels, and at almost double the pace compared with the last rate hike cycle in 2018.”
As brokered GICs took off in the first two quarters, balance segmentation has continued to lean towards high-net-worth individuals. Accounts with balances above $100,000 have reached 44.0 percent of the market, up from 38.4 percent three years ago. Higher rates in the fixed-term market and market shakiness tell a simple story for clients in advice relationships, easing the sales process for FTDs in those channels. With interest rates still on the rise, the report predicts these trends will continue for the second half of 2022.
In the first six months of the year some deposit-takers have increased their three-year GIC rates by over 200 basis points (bps) and are now offering over 4 percent for a mid-term product. While investment term still favours the short end of the curve, with original term of one year and under accounting for 47.4 percent of sales in the six months ending June 2022, allocation towards the longer term is poised to take off once rates begin to stabilize.
Learn more about the Deposit Advisory Service report by clicking here.
About ISS Market Intelligence
ISS Market Intelligence (MI) is a leading global provider of data, analytics, insights, media, and events solutions to the global financial services industry. ISS MI empowers global asset and wealth management firms, insurance companies, distributors, service providers, and technology firms by providing cutting-edge market-engagement platforms and the actionable intelligence necessary to fully assess their target markets, identify and analyze the best opportunities within those markets, and execute on comprehensive go-to-market initiatives to grow their business. ISS MI clients benefit from our increasingly connected global ecosystem that leverages a combination of proprietary data, powerful software and analytics, timely and relevant insights, in-depth research, as well as an extensive suite of industry leading media brands that deliver unmatched market connectivity through news and editorial content, events, training, ratings, and awards. ISS MI data and analytics solutions include intelligence from BrightScope, Discovery Data, Financial Clarity, Flowspring, FWW, Investor Economics, MISight, Mortgage Clarity, Plan for Life, RainmakerLive, and Simfund, and ISS MI media brands and market-engagement platforms include Chief Investment Officer, PlanAdvisor, PlanSponsor, Financial Standard, FS Sustainability, Money, and Industry Moves.
Founded in 1985, the Institutional Shareholder Services group of companies (ISS) empowers investors and companies to build for long-term and sustainable growth by providing high-quality data, analytics and insight. ISS, which is majority owned by Deutsche Börse Group, along with Genstar Capital and ISS management, is a leading provider of corporate governance and responsible investment solutions, market intelligence, fund services, and events and editorial content for institutional investors and corporations, globally. ISS operates on an arm’s-length basis and has adopted policies designed to protect the independence and integrity of ISS’ research offerings. ISS’ 2,600 employees operate worldwide across 29 global offices in 15 countries. Its approximately 3,400 clients include many of the world’s leading institutional investors who rely on ISS’ objective and impartial ESG and governance research, market intelligence and fund services and data and analytics, as well as public companies focused on ESG and governance risk mitigation as a shareholder value enhancing measure. Clients rely on ISS’ expertise to help them make informed investment decisions.
Analyst – Communications