More transparency for savers, but also commissions that are more difficult to justify without adequate performance. The Mifid 2 directive (Markets in Financial Instruments Directive), which will enter into force at the beginning of 2018, promises to radically change the financial advisory sector. "The approach of the European directive is wrong, but we must embrace it with a far-sighted approach", argues among others Alessandro Foti, CEO of FinecoBank, on the occasion of the Consulentia 2017 event, underway at the Rome Auditorium and which sees the participation of 2.600 protagonists of asset management.
"An industry that has reached a value of 450 billion euros - Foti recalls -, taking advantage of the inadequate responses of the banking system, especially in terms of transparency and consultancy". Transparency is at the heart of financial advisory reform wanted by Europe: broader and more penetrating disclosure obligations are envisaged for the intermediary; there will be a clear distinction between value-added investment services (advice and individual portfolio management) and execution services (placement, receipt and transmission of orders) performed by intermediaries; the possibility for intermediaries to appoint tied agents is introduced.
But above all, and it is this that does not convince the audience of speakers at the Rome Auditorium, from Foti to the CEO of Banca Mediolanum Massimo Doris, to the CEO of Fideuram Paolo Molesini, the consultancy will come starting from 2018 clearly distinguishes between independent and non-independent. “We will continue to focus on non-independent consultancy, the independent consultancy introduced by the European legislator is a label”, declare the guests of Consulentia in unison.
The major changes will therefore concern the remuneration area following the introduction of consultancy on an independent basis paid exclusively by the customer (fee-only), on the Anglo-Saxon model, alongside the non-independent one, paid through commissions charged to the product, as currently occurs in the vast majority of cases. Even for the latter, in any case, the qualitative level of the service will necessarily have to be raised, providing it with financial services and services that have value on the entire customer's assets, as well as greater indications on costs.
“Transparency is fine – explains Foti of FinecoBank -, it can be an added value to expand the number of customers, but it is obvious that the first reaction to such an intervention is negative, since the classification of activities in the form of consultancy can reduce profit margins”. The rationale of the reform is to move towards consultancy free of conflicts of interest, with costs already established, avoiding the offer of products characterized by an explicit and implicit cost structure that is only partially explained to the customer (but sometimes hidden) for obvious sales reasons. So how to equip yourself?
With greater transparency on costs, according to Raimondo Marcialis of MC Advisory, "the risk is that the customer may refuse to pay not finding the right service and operators could lose market share compared to competitors. This implies the need to further train the staff and to adjust the quality of the service, with additional costs". "The new legislation reaffirms some principles in which we fully recognize ourselves, such as the value of continuous assistance over time (very different from the practice of moving the customer's portfolio to generate commissions) and the condemnation of opaque forms of pricing", comments Antonello Piancastelli, co-general manager of Fideuram, the network of the Intesa Sanpaolo group. An evolution of the approach that will inevitably affect the balance between product houses, distribution and customers, according to trajectories that are difficult to estimate today.
