Canada’s Financial Superteam: The Other (Non-Dealer) Intermediaries

Claire Montrose

Hey everyone, welcome back to Clear With Claire! Claire here—your friendly neighbourhood explainer of all things Canadian Securities Course. So, if you tuned in last time, we dove deep into investment dealers—those retail firms, institutional player types, and the integrated dealer giants—that act as the financial matchmakers between savers and borrowers in both primary and secondary markets. But today, we’re taking a walk on the other side: who else is out there moving capital back and forth, if they’re not investment dealers? Because let’s be honest, if you picture the Canadian financial system as a hockey team, investment dealers might be the goalies and forwards, but there’s a whole supporting cast making the plays happen.

Claire Montrose

So, let’s tackle this: what do we actually mean when we say “financial intermediary” in the Canadian context? It’s not just about investment dealers. A financial intermediary is any institution that stands between savers and borrowers, helping to channel money to its most productive uses. Think: banks borrowing your savings and lending them out as mortgages, or insurance companies taking in premiums and investing that pool to eventually pay out claims. These institutions matter for two big reasons: first, they pool and manage risk, and second, they make capital flow efficiently, which is the lifeblood of our economy. Savers want their money safe, borrowers need funds, and intermediaries fill this gap, filtering for trustworthiness, figuring out who gets a loan, and smoothing out the bumps of risk and information gaps.

Claire Montrose

Let’s get our cast of characters straight. You’ve got chartered banks, of course, but also credit unions and caisses populaires—super important for a lot of communities. There are trust and loan companies (think Vancity or, back in the day, Canada Trust before it became part of TD), insurance companies of all stripes, the big pension funds, various mutual and investment funds, and even finance companies that specialize in lending directly to consumers or purchasing those buy-now-pay-later loans from retailers. All of these fit under the broad umbrella: financial intermediaries outside the dealer space.

Claire Montrose

Now, if you picture the regulatory landscape—maybe this is just me growing up with two parents working in Ottawa, but I remember being a twelve-year-old sitting in the waiting area at OSFI (the Office of the Superintendent of Financial Institutions) for the first time... just starstruck by the sheer number of institutions under one regulatory roof. It’s not just the Big Six banks. There are dozens of credit union centrals, life insurance giants, pension plan managers, and a whole host of other non-dealer institutions all needing oversight. All I could think was, “wow, this is way more complicated than it looks from the outside.” So, don’t fall into the trap—just because investment dealers get all the press, every one of these players is essential to keeping our financial system running.

Claire Montrose

Alright, so let’s get into what these institutions actually do, starting with chartered banks—the most familiar face for most Canadians. The big banks in Canada are divided into three Schedules under the Bank Act. Schedule I is the homebase: Canadian-owned banks like RBC, TD, Scotiabank, BMO, CIBC, and National. These guys are all about deposit-taking, lending, mortgages, and now, increasingly, offering investments and wealth management services either directly or through subsidiaries. Something fun: the Big Six aren’t just big by Canadian standards—they regularly rank among the most stable and profitable globally, largely because our regulatory system is, well, kind of boring. And boring, in banking, is good!

Claire Montrose

Schedule II banks are the foreign-owned but separately incorporated banks operating in Canada. Think Citibank Canada or AMEX Bank of Canada. While they offer many of the same services as Schedule I, they often focus on niches or global clients. Then, Schedule III—these are foreign banks operating Canadian branches, like Barclays. Mostly corporate or institutional-focused, less about your local chequing account.

Claire Montrose

Banks make their money in all sorts of ways, but maybe the most classic is the interest spread: borrow at one rate (say, on your chequing account) and lend at a higher rate (on mortgages, business loans, you name it). They provide liquidity to the rest of the system by allowing us to deposit and withdraw daily, while also making long-term loans—so they’re balancing short-term obligations with longer-term lending. That’s part of why bank regulation and OSFI’s rules matter so much, because if they get that balance wrong, well... 2008 ring a bell?

Claire Montrose

Let’s shift to insurance companies. Insurers operate on the magical math of pooling massive amounts of risk. They collect premiums (for life, disability, health, home, auto... you name it), invest those premiums in bonds, stocks, and real estate, then pay out claims as needed. It’s all about matching long-term liabilities with long-term investments. If you’ve heard of Manulife or Sun Life, you’re already familiar with some of the biggest players. They’re major institutional investors—not just selling you insurance, but also deploying billions across global markets. And because their liabilities—like annuities and life insurance—can last decades, their investment strategies have to be top-tier in managing interest rate risk, credit risk, and regulatory requirements from OSFI.

Claire Montrose

Pension funds are another Canadian superpower. Think Canada Pension Plan Investment Board (CPPIB) and Ontario Teachers’ Pension Plan (OTPP). These are massive pools collecting contributions from workers and employers and then investing globally. The key is their long-term horizon—they want to ensure they can pay out benefits decades into the future, so they’re active in everything from infrastructure to private equity to real estate. OTPP, in particular, has become known for its sophisticated risk management and diversification strategies, weathering market volatility while growing assets for future retirees. It’s not just about bonds and blue-chip stocks anymore—Canadian pensions are big players in alternative assets.

Claire Montrose

One other note: Each of these types of intermediaries has different regulatory regimes. Banks and insurance companies are mostly federally regulated by OSFI, while pensions are usually provincially regulated unless they cross borders or are tied to federally regulated industries. This patchwork is either Canadian ingenuity or Canadian bureaucracy, depending how you feel about paperwork!

Claire Montrose

Next, let’s talk about credit unions and caisses populaires, which—if you grew up in a small town or a tight-knit neighbourhood, you probably know the difference. Credit unions are member-owned financial co-ops, often focused on a community, region, or even a specific profession or group. My family’s neighbourhood credit union in Ottawa was, and still is, the go-to for a lot of people who want a relationship-driven approach, or who just want their bank to feel a little less, well, corporate. They’re provincially regulated, which means every province handles deposit insurance and oversight slightly differently (for example, the Deposit Guarantee Corporation of Manitoba covers credit union deposits there). These institutions serve as critical financial access points in communities that might otherwise be underserved by major banks.

Claire Montrose

Trust and loan companies are a unique hybrid—not quite banks, not just investment shops. Historically, they played a big role in estate planning, holding assets in trust, acting as executors, administrators, and offering lending services (think personal or mortgage loans). Some trust companies like Canada Trust became part of bigger banks, but others—like Vancity—are still going strong, offering that fiduciary relationship and a mix of deposit/lending/investment products.

Claire Montrose

Investment funds, mutual funds, and now ETFs are also massive intermediaries in their own right. These companies or trusts pool money from thousands of investors—the so-called “little guys”—allowing them to own a piece of a diversified portfolio with professional management. For a long time, mutual funds dominated, and now index-tracking ETFs are everywhere. They provide liquidity, diversification, and a way for small investors to tap into markets they’d never reach on their own.

Claire Montrose

Consumer and sales finance companies round it out—these are the folks offering personal loans, direct consumer lending, or purchasing those “buy now, pay later” contracts from retailers. While they often cater to people who might not qualify for bank credit, they charge higher interest to compensate for higher risk. Interestingly, in 2022 during a broader drop in non-bank financial institution assets, finance companies’ assets actually grew at a time when mutual funds—especially fixed-income and mixed funds—took a hit thanks to rising interest rates and declining bond prices. This highlights how market cycles hit different intermediaries in very different ways.

Claire Montrose

And all this is still shifting, because market volatility, regulatory change, and new fintech entrants mean the line between “bank,” “investment fund,” and “other intermediary” is blurrier than ever. Plus, when we talk about “non-bank financial intermediation” (that’s the fancy official term for the whole sector), we see its share of financial system assets drop in 2022 for the first time in over a decade, largely due to declines in mutual funds and investment funds—while good old deposit-taking institutions (banks and credit unions) actually increased their share.

Claire Montrose

That’s a lot to digest, so if you’re prepping for your CSC exams, remember: every one of these intermediaries—banks, insurers, pension funds, credit unions, trusts, mutual funds, finance companies—plays a distinct but interconnected role in making sure capital flows smoothly from savers to borrowers, from one generation to the next. Understanding their differences isn’t just an exam requirement—it’s also at the heart of how our entire economy works. And hey, if you want a bonus tip? Pay attention to how these changes ripple through when markets get rocky. That’s when you really see who’s doing the heavy lifting in the financial system.