Danger of defocalization

Advisor | November 2020

Since the very beginning, the world of financial consultancy has been the early hotbed of a successful service model that, in time, has become exemplary for financial institutions. 

Moreover, one of the main strengths of the world of financial consultancy is its continuous evolution – of the dynamics that regulate the relationship between financial advisors and banks/networks; and, as a consequence, of the relationship with end clients (that is, the clients of financial advisors).  

Far from being stagnant, the industry of financial consultancy keeps reimagining itself and is highly responsive to change – this is certainly a key factor that will secure its future. 

We shall begin from an exploration of the relationship between financial advisor and banks/networks. In fact, the role of the bank/network used to be less important to the then-called financial promoters than it is today. 

There are several reasons – first of all, at the dawn of financial consultancy in Italy in the 70s and 80s, the first banks/networks (Fideuram, Programma Italia, Dival, to name just some of the most famous ones) were true and proper startups; as such, they were entirely devoid of the value that today distinguishes brands like Fideuram, Mediolanum, Allianz, Generali, or Fineco. All that mattered was the personal brand and reputation of each financial promoter. 

Today, things have changed – there is less and less room for “free agents” not supported by a well-established financial institution. 

The second reason why a successful model of financial consultancy derives from the conjunction of financial professionals and banks/networks is linked to the importance of technology and the relevance of the investments.

Digital tools for offsite traders, home banking and web collaboration platforms are very costly and require regular updates – this level of commitment cannot and should not be expected from a single professional. It’s as if the best F1 driver in the world wanted to build his own stable, while F1 racing requires investments worth billions of euros. Besides, it is no longer time for gentlemen drivers à la Enzo Ferrari. 

In addition, the relationship with the bank/network tends to affect the relationship with clients. The clients’ level of satisfaction depends largely on the availability of cutting-edge remote banking platforms, clear and transparent access to products and services, efficient procedures etc. If the bank/network can satisfy the requirements of its customers, the financial advisor shall be facilitated in his/her job.

A good relationship between bank/network, advisor and client is the keystone for a successful model based on both intangible elements (e.g. the brand value of the bank/network) and tangible elements (e.g. digital platforms, products and services), the expertise of the financial professional and the clients’ level of satisfaction. Within this relationship, the job and rights of each member shall be recognized; at the same time, each member has to fulfil his/her commitments. 

The equilibrium of this triptych of interests and needs is quite delicate, difficult to identify and even more difficult to achieve in the world of financial consultancy.

Some financial networks have achieved a win-win(-win) balance; some others struggle to reach it. While the former tend to look ahead and share a medium to long-term time horizon, the latter tend to focus on the present within a short-term time horizon.

There certainly is room for both instances; however, financial institutions which operate following a three-way win-win(-win) logic will probably strengthen their market share. 

Signs of this change can already be glimpsed in the world of financial consultancy – in particular, more than in the past, regret is becoming increasingly common among financial advisors who changed network, underestimating the importance of the bank/network and its ability to assist clients in the best way.

Only time will tell if these are just isolated signs or the beginning of a new revolution in the world of financial consultancy.

Nicola Ronchetti