Financial advice and the future of the asset
management industry in Italy
Giovanni Siciliano
Tutela del Risparmiatore e modelli di Governance nell’Asset Management
Milano, 20 gennaio 2014
OUTLINE
I.
II.
III.
IV.
V.
VI.
Trends in the Italian AM industry
Main industry weaknesses
AM and financial advice
Market failures
Foreign competition
The role o f regulation
Trends in the Italian AM industry
Portfolio composition of Italian households
attivitàfinanziarie
2007
polizze
2011
azioni
Since 2007 Italian
households have
significantly lowered their
holdings of AM products
2012
risparmiogestito
obbligazioni
titoli di Stato
depositi erisparmiopostale
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Source: Consob Annual Report 2012
Milano, 20 gennaio 2014
3
Trends in the Italian AM industry
Net inflows by product type
160
Net outflows have been
significant since 2007,
hitting mutual funds and
insurance products worst
fondi comuni promossi
da intermediari italiani
120
80
fondi pensione
40
0
gestioni patrimoniali
individuali
- 40
polizze vita rami III e V
- 80
- 120
fondi comuni promossi
da intermediari esteri
- 160
- 200
Totale
- 240
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Net inflows and AuM of mutual funds across EU
patrimonio
raccoltanetta
250
2.700
200
Italy is now well behind
UK, FR and GE in terms of
AuM by mutual funds
2007
2008
2009
2010
2011
2012
150
2.400
2.100
1.800
100
1.500
1.200
50
900
0
600
- 50
300
- 100
fondi
Francia Germania
internazionali
Regno
Unito
Italia
altri paesi
europei
Milano, 20 gennaio 2014
0
fondi
Francia Germania
internazionali
Regno
Unito
Source: Consob Annual Report 2012
Italia
altri paesi
europei
4
Industry weaknesses
• Why bank ownership of AMC can be a problem?
• When distributors own producers (vertically integrated system) conflicts of interests may
obviously arise. Rational clients may perceive this, and be less willing to pay for financial
advice, or simply less willing to buy AM products in the first place
• In a captive market there are less incentive to cost reduction, innovation and to invest in
product quality . Dissatisfaction for product quality may further reduce the demand for
financial advice
Milano, 20 gennaio 2014
5
Financial advice in Italy
Financial advice to Italian households
distribuzionedellefamiglieche ricevono servizi di consulenza MiFID
in base alla modalità con la quale ricevono il servizio
diffusionedel servizio di consulenza
• Incredibly tiny share of
Italian households
get/demand personalized
financial advice, even
among more educated
people
100%
100%
80%
80%
60%
60%
40%
40%
20%
20%
0%
0%
2007
2010
2011
2009
2012
2010
2011
2012
famiglieche non sanno distinguere la modalità con la
qualericevono il servizio
servizio di consulenzaMiFID
consulenzagenerica
famiglieche ricevono una propostadi investimento su
iniziativadell'intermediario
consulenzapassiva
ricevono una propostadi investimento a
nessunaconsulenza
Raccolta
netta e patrimonio dei fondi comuni famiglieche
in Europa
seguito di una loro specifica richiesta
servizio di consulenzae grado di istruzione
% di famiglie che percepiscono conflitti di interesse nel
servizio di consulenza
100%
30%
80%
• High share of households
perceives conflict of
interests in MiFID financial
advice services
25%
60%
20%
40%
15%
10%
20%
5%
0%
diplomadi
laurea
titolo di
studio
inferiore
2007
diplomadi
laurea
titolo di
studio
inferiore
0%
2007
2008
2009
2010
2011
2012
2012
nessunaconsulenza
consulenzapassiva
Milano, 20 gennaio 2014
consulenzagenerica
servizio di consulenzaMiFID
Source: Consob Annual Report 2012
6
Financial advice in Italay
Degree of of satisfaction with financial advice by Italian households
2011
• Less than 10% of
households who do
get/demand financial advice
are fully satisfied of the
service
2012
35%
30%
30%
25%
25%
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
basso
servizio di consulenzaMiFID
elevato
consulenzagenerica
basso
elevato
consulenzapassiva
Willingness to pay for financial advice by Italian households
• High share of households
are not willing to pay for
financial advice (more than
50% of households who
declare to have a financial
adviser are not willing to
pay for financial advice)
(dati a fine 2010)
Source: Consob Annual Report 2012
Milano, 20 gennaio 2014
7
Market failures
• If consumers are not willing to pay for financial advice, how distribution can possibly be
remunerated? Rebates of management fees to distributors is the industry standard in a
vertically integrated system. From a groupwide perspective, this is not necessarily a
problem, though it might be that distributors are getting a disproportionally higher share
of the value added of AM services.
• Lack of competition in distribution and inability to use the financial advice quality as a
competition tool may hinder the emergence of new/independent AM players. They
either have to pay to much to access distribution networks or the distrust in the quality
of financial advice may make investors unable to identify good AM
• Hence main market failures come from excess market power in the distribution due to
vertically integrated industry models and from informational asymmetries due to distrust
in financial advice
Milano, 20 gennaio 2014
8
Foreign competition
AM products distributed in Italy
consistenze(miliardi di euro)
composizionepercentuale
1.250
100%
1.000
80%
750
60%
500
40%
250
20%
0%
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
fondi comuni promossi da intermediari italiani
fondi comuni promossi da intermediari esteri
polizzevitarami III e V
fondi pensione
gestioni patrimoniali individuali
Fonte: Relazione Annuale Consob per l’anno 2012
• Market failures may imply that the market remains underdeveloped or that there are less AM
services than what would be socially optimal
• AuM of mutual funds and insurance products is shrinking and foreign competition is slowly
wresting a significant slice of the incumbents business.
Milano, 20 gennaio 2014
9
The role of regulation
• Regulation should foster the development of an efficient market for financial advice and
the MiFID review is going into this direction.
• Independent financial advice is the key to solve market failures, but the point is how to
convey convincingly to investors that the service is really independent. This is the debate
over MiFID revision (no rebates and sufficiently wide product menu). Even if investors get
convinced, the question is whether the business model of independent advice is viable
given the strong resistance to pay for financial advice?
Milano, 20 gennaio 2014
10