Episode 6: Grow your Business 1500% with a Term Deposit Solution

Portfolio+ recently published a Case Study with Fairstone Bank of Canada and their success in by using our GIC or term deposit solution to raise funds by offering deposits. This solution and the ease with which deposit orders are accepted and confirmed empowered them to grow their product offering. Pat Casullo, a Senior Sales Account Manager at Portfolio+ recently had the opportunity to speak with Graham Casselman from Fairstone Bank. Today’s episode expands on the case study and dives deeper into some of the topics. I’m excited that we were able to capture and share this discussion with you today. And with that, I am going to hand it over to Pat and Graham.

Pat Casullo:

Hello, my name is Pat Casullo and I’m a Senior Sales Account Manager at Portfolio+, and I’d like to welcome everyone to today’s podcast. Today’s episode continues our discussions around term deposits. And we’re excited to be joined by Graham Casselman of Fairstone Bank of Canada. Fairstone Bank of Canada and its subsidiary, Fairstone Financial Inc, form a leading Canadian consumer-lending group offering a wide range of lending products online and at their 240 branches coast to coast. We recently published a case study about our relationship with Fairstone Bank and their astounding success and growth using our term deposit management solution. Now, I’ve given a brief overview about Fairstone Bank, but the audience would love to hear more about you, Graham, and your background in the financial industry. And also, over the years, your organization has changed names and rebranded a few times, so it would be nice to hear about the history of how you became Fairstone Bank of Canada.

Graham Casselman:

Okay. Thanks, Pat. Yes, I myself have been in the financial services industry for about 20 years at various institutions, a few of them leading Canadian financial institutions, and in various roles, some of which have involved raising cash to fund our business, which is what my role is now at Fairstone Bank. About Fairstone Bank, many not know, but they were originally, or when I started, they were originally Walmart Bank or I had started just after Walmart had sold Walmart Bank to some private investors and renamed them Duo Bank. Walmart had established a bank in-house to finance its MasterCard business. And when they sold the bank to become Duo Bank, they still maintained that mandate. But as Duo Bank being independent, they wanted to branch out into other areas of the banking business. And of course to do that, they needed to raise funds. And being a bank, they were able to issue deposits. Shortly after becoming Duo Bank, they actually acquired, as you mentioned, acquired Fairstone Financial. This was announced early 2020. And once it passed a few regulatory hurdles, it rebranded itself as Fairstone Bank of Canada, which now includes both entities, the former Duo Bank, which as I said, was in the business of financing Walmart’s MasterCard and Fairstone Financial’s primary business was consumer lending. So that’s where we are today.

Pat Casullo:

Perfect. Thanks, Graham. Thanks for that history. And Fairstone Bank of Canada has been a valued client and partner of Portfolio+ for several years now. Would you mind sharing with our audience Fairstone Bank of Canada’s business strategy that Portfolio+ was able to collaborate with you on?

Graham Casselman:

Okay, sure. When Duo Bank became independent of Walmart, we needed to find some other sources of funding. So there were a few, and one of course, which was going to be deposits, given that we were a bank unable to take deposits. In the potential areas of the deposit business we looked at, the one that made the most sense to us was the broker deposit business for a few reasons. One of them of course being the very low overhead costs involved, and another being that it gave us the ability to raise a lot of funds in a short period of time. And it also gave us the ability to exit the business if needed. When we decided to go that route, we selected Portfolio+ as our vendor for term deposits for a number of reasons. Portfolio+ was very experienced in the industry, as well as they were well-integrated with the CANNEX system, which is the financial intermediary system that we use. As well as Portfolio+ was very up to speed on a lot of the CDIC requirements, which is very helpful to us. And of course, we have to adhere to those, and the requirements are changing all the time with respect to data and operational issues and matters like that.

Pat Casullo:

Perfect. Thanks, Graham. And now that you’ve been involved in the term deposit business for a number of years now, can you share or tell us about the amazing growth that Fairstone Bank of Canada has experienced using the term deposit solution? Perhaps, maybe starting from your early days entering the market to where you are at current state today?

Graham Casselmam:

Absolutely. When we entered the broker deposit business, this would’ve been in September of 2019, we got off to a very good start. We onboarded our first broker then and onboarded another one shortly thereafter. And by the end of 2019, we actually had raised a few hundred million dollars in assets. And we started off 2020 strong as well, but then things kind of tapered a little bit when COVID hit, just because our need for funds kind of waned is a lot of other institutions did as well. Really didn’t really significantly pick things up I would say till about a year ago, when the economic effects of COVID had passed and we had a now need to raise more funds. So we’ve been going very strong for, I would say the last year. To the point now where we’ve got well over $2 billion in deposits and we, of course have plans to continue to grow that business.

Pat Casullo:

Wow, that definitely is some amazing growth. Given, I think you said it’s about three years, three and half years?

Graham Casselman:

Yes, about three and a half years.

Pat Casullo:

Wow, amazing. And then in terms of just impacts, are you able to share some of those positive impacts that you’ve seen internally to the overall operations managing the portfolio? Any efficiencies you’re experiencing as that portfolio continues to grow?

Graham Casselman:

Yes, I mean it’s hard to really compare to anything because we did kind of start this business from scratch, but I can say the duties, at least at the front office to raise the deposits are shared amongst a few people. But if you combined everyone’s efforts, I would say it doesn’t even reach one FTE. So there’re certainly a lot of efficiencies being in this business, and given the amount of money we’re able to raise in the time we’re able to raise it and the staff that’s required to manage it. So certainly it is, in that respect, very efficient. And certainly, the Portfolio+ module meets all our needs in that respect. So we’re able to run things on a very, very low budget. And as we’ve grown, of course as our deposit base has grown, really our administrative matters and overhead costs haven’t. So yes, as we continue to grow, the efficiencies will only increase.

Pat Casullo:

Oh, perfect. Thanks, Graham. And then what advice would you like to provide the listeners based on your own experience if they’re considering pursuing the nominee deposit through that broker channel? Anything that you can share for those listeners based on, again, your experience?

Graham Casselman:

I think the key thing is to develop the appropriate business partners early on. Your vendor, Portfolio+, as well as establish relationships with not only CANNEX and CDIC, but also, and probably most importantly with the brokers. Because ultimately, if you are entering that business, they’re the ones who are selling your deposits. And the more broker boards you can get on, the more cash you’ll be able to raise in a given amount of time. So certainly, that’s very key. And selling yourself to the brokers, you certainly have to make the case that you have these efficiencies and you are able to serve the brokers well because when their clients hold your deposits, I mean there are some servicing requirements and there is an expectation on the broker’s part you’ll be able to deliver in an efficient manner to meet their clients’ needs. So certainly, I would establish those relationships well before your actually targeted go-live date, absolutely.

Pat Casullo:

Yes, perfect. So what I’m hearing is one of the key things there is to build those relationships with those brokers, have that strong relationship, so again, that they’re going to be funneling that business into your institution?

Graham Casselman:

For sure.

Pat Casullo:

Perfect. So based on the current economic state, we’ve definitely seen the popularity of term deposits skyrocket, obviously fueled by the higher interest rates. Do you see this trend continuing and why do you think term deposits are such a popular investment right now?

Graham Casselman:

Well, a couple of reasons. I think of course, safety is one of them. And as you mentioned, the higher rates has lured people into the deposit business. I would say we really didn’t see a big uptick in the business until a little after the start of COVID, maybe even not until early 2022. 2022 was a real bang year for the deposit business. It has declined maybe a little bit this year, but still very strong compared to pre-2022. And I would certainly see it staying at that levels or maybe growing slightly in the near future, just given things like demographics and given some uncertainties in the overall economy right now. If the economy does slow down, which many economists are predicting, and that’s usually good for the deposit businesses as investors look for safety. And a lot of investors, of course do their investing through a brokers, who offer the broker deposit. So I would certainly say there’s certainly opportunity for growth in the near and medium term. Beyond that, it’s really hard to say. A lot of external factors will influence that. Of course, the economy and what happens with rates in a few years from now, who knows? So when rates are lower, it seems people, as you would expect, lock in for less time. And that’s usually maybe better for short-term investments like savings accounts. And it’s when the rates are higher that you’d see more flight to the term deposit. So I would say going forward in a few years from now would be a little hard to predict. But certainly, in the near term I would say it’s a good business to be in and it’s a good way for institutions to raise needed funds and in a efficient way and in a short period of time.

Pat Casullo:

For sure. So is it fair to say that in the foreseeable future, you still see term deposits being a portion, percentage-wise, of investor’s total portfolio?

Graham Casselman:

Oh, for sure. I mean, it’s a very secure investment, particularly if you’re within your insurance coverage limits. And it’s certainly something that most investors understand well. So yes, I would certainly say as a fixed-income investment, it would continue to be very popular among investors. There’s always going to be a demand for it. Some of the big upticks you’ve seen it in certain times, I mean that’s a little bit variable, but overall, I absolutely would see term deposits being in high demand. Another reason, as I mentioned, that the demographics is you’ve got a lot of people who are retirement age now, who are generally looking to park their money in more safe vehicles, and certainly term deposits, if they’re within their coverage limits are an obvious choice for a lot of people.

Pat Casullo:

So Graham, do you see any opportunities for innovation in the term deposit space for financial institutions?

Graham Casselman:

There has been a lot of innovations over the last couple of years. CDIC had brought in some new data requirements, which required systems upgrades and some innovations came out of that. Certainly, there is some room for more. I know for example, a lot of clients may transfer their GIC from one broker to another. That’s still a very, very manual process. And as your book grows, the number of requests for that are only going to grow as well. I know I was at a conference last year and they were looking at developing such a industry-wide system to accommodate that, but certainly if they could do that, that would certainly eliminate one of the very manual processes that still exists. But certainly in the time that we’ve been in the last three and a half years, certainly we’ve come a long way in seeing some of the processes go from being highly manual to being almost completely automated.

Pat Casullo:

Perfect. That’s great. Graham, and just one final question to wrap up the podcast. Graham, are there any final insights or best practices you’d like to share with the listeners today?

Graham Casselman:

Yes, a few things. As I had mentioned before, once your relationship with a brokerage is established, it’s very important maintain that strong relationship so that you’ll continue to get their business or they’ll continue to drive business your way. Another thing of course, I would say is make sure that you’re really up-to-date on a lot of the systems requirements, because that’s really a key aspect of this business, given how much of it is automated compared to say a regular non-broker deposit business. So I would say keeping state-of-the-art technology is certainly a best practice as well. And I think another thing is just staying abreast of all that’s happening in the industry. Doesn’t seem like too much had happened until maybe a few years ago, but in the last few years, a lot has changed and I think there’s certainly going to be more changes in the near future. So I think being ahead of the curve there is key for anyone who wants to be in this business and use this business as a major funding source.

Pat Casullo:

That’s great. Thanks, Graham. So thanks again, Graham, for joining us today. Certainly learned a lot and it was pleasure speaking with you today. And again, thank you for your time today.

Graham Casselman:

You’re welcome. My pleasure.

Dianne Cupples:

That was a wonderful conversation, building upon the information shared in the Case Study. I really appreciate Pat and Graham for taking the time out of their busy schedules to share their thoughts with our listeners. If you’d like to learn more about the Fairstone Bank of Canada story and haven’t already read the case study, please check it out on our website at portfolioplus.com. For more information on how you can implement a GIC solution in your organization, please reach out to Portfolio+ through our website. I hope you enjoyed our podcast today and appreciate you spending your time with us. If you’d like to learn more about Portoflio+, or have any feedback, you can reach us through our website or follow us on LinkedIn or Twitter at portfolioplus19. You can subscribe to our podcasts wherever you listen to your podcasts or through our YouTube channel. Until next time, all the best.