Is a European tsunami about to hit the Italian financial advisory and asset management industry, precisely that industry that in recent days, from Azimut to Fideuram Intesa Sanpaolo, to Banca Mediolanum the day before yesterday and Banca Generali yesterday, has had excellent budget figures for 2022? “D-Day”, to be confirmed, will be on the 5th of April when the European Commission will present the “Retail Investment Strategy” which will address the issue of “retrocession” or “induction” commissions recognized in sales and distribution of investment products and services. They are that part of the remuneration that the bank that sells them a product (the classic mutual fund, for example) receives from the client and that later “regresses”, that is, “deliveries” to the distribution structure, precisely the networks of financial consultants.
Indeed, the Commission would like to abolish setbacks, standardizing the remuneration arrangements for the distribution of financial products and consultancy activities in all countries of the European community itself. These are commissions that in our country are around 7 billion euros and that represent a good part of the income from the profits of the banks-networks of financial advisors. In Italy, this remuneration mechanism prevails because independent consultants are a minority in the country who, on the other hand, are charged directly by the client, such as when going to the lawyer, accountant or doctor.
The Commission is inspired by the British model when, around 2010, Great Britain banned commission rollbacks for distributors. The result was that the savings market became polarized: on the one hand, the rich or super-wealthy clientele who received a totally independent service and paid in cash; on the other, small clients, who flocked to the trading platforms, without any more personal assistance.
Halfway there were the “orphan” savers who, despite having a good asset endowment, no longer had a service because it was uneconomical for financial intermediaries to offer it, and did not even have consultants to turn to, because their number had drastically reduced. And for them, the temptation of do-it-yourself investments, which have always been extremely risky, is strong. The current configuration of the distribution of services and financial instruments of the Italian industry assumes positions that are decidedly contrary to the Commission’s proposals and, if the rule for the abolition of commissions were approved, the conditions would be created for a destabilization of the entire system.
In particular, management policies will have to be reviewed and new sales strategies developed; the entire relationship framework of consultants with product companies and asset management companies will have to be changed, the organizational structures relative to distribution and placement companies will have to be reviewed, as well as the contract models applied to professional figures such as consultants, agents, agents and subordinates. The entire distribution sector would be heavily penalized and therefore forced to structurally review its business and strategies at significant costs.
A clear word in this regard came from Massimo Doris, CEO of Banca Mediolanum, according to whom the possible ban on rollbacks, which is being discussed in Europe, “is more ideology than anything else, since in the end it looks at negative things and avoids looking at the positive effects.” According to the businessman, a possible ban could, in fact, generate distortions in the construction of clients’ investment portfolios. “For example – he observed – let’s think of a world where a Bot of one year pays 1% and a ten-year Bot yields 2.5%. If I have to apply the commission on the products, the customer ends up buying only long-term government bonds, otherwise, after the commissions, he would see his return zero”.
Doris also recalled that in Britain there are no full costs applied to the smallest customer. “In summary – Banca Mediolanum number one concluded – I believe that the best thing is to impose transparency on the commissions that the client pays to intermediaries. We need transparency and a free market, so that the customer can go wherever he wants. Rather, I think it is illiberal to ban a particular distribution system.”
Source: IL Tempo
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
