Bluerating | September 2020
In the UK and USA, the independent financial advisor is a well-established professional figure. On the other hand, the job is still quite uncommon in Italy, where only 240 out of the over 55.000 financial advisors registered to the OFC (Single Register of Financial Advisors) are IFAs.
However, fee-only consulting interests 91% of HNW clients (as compared to 89% in 2019), 75% of private clients (as compared to 69% in 2019) and over half (55%) of affluent clients (as compared to 45% in 2019).
Of course, the term “fee-only” sounds quite captivating. So much so that fee-only consulting services are also provided by banks and networks of financial advisors.
So, what is preventing independent consulting from achieving the same popularity it enjoys in Anglo-American counties? The reasons are many and varied. Here are some of the most important ones.
Italy is a bank-centred country. For better or worse, banks have always represented the centre of financial activities, dealing with the supply and management of money: with its medium-small size and its family-run companies, the Italian capital market – represented mainly by the Stock Market – is undersized in comparison to other countries.
No matter how challenged by crises and scandals, the reputation of banks remains favourable – this applies especially to banks working as centres of banking groups. However, reputation rhymes with trust and trust is the fuel for the acquisition and management of clients.
Over the years, banks have undergone several changes, leading to their digitalization and the birth of new banks known as banche reti. Thanks also to the contribution of FAs, banks are riding two emerging trends: digital as an alternative to physical and local presence; the high level of business proactivity connected to a job paid entirely on commission.
So, to what extent can one single advisor – however valid, experienced and enjoying a solid reputation –compete with a bank or a banca rete that has been on the market for the past 50 years and has invested millions of euros in communication strategies? And, can that same advisor be in possession of the technological equipment, tools and platforms necessary to offer a financial consulting service as advanced as that provided by banks?
Clearly, there is a possibility that independent consulting may grow further. However, it will require time: after all, even financial advisors – today widely appreciated and respected – had to fight for decades in order for their profession to be fully recognized.
Predictions about the future of the IFA would certainly benefit from an analysis of its professional profile. In this regard, an early 2020 study conducted by FINER on 177 IFAs representative of a target universe composed of 240 active professionals (source: Consultique SCF, NAFOP, AssoSCF) has brought to light several relevant points.
On average, IFAs are very satisfied with their job (54% are fully satisfied); 71% of them have graduated and use social networks (mostly LinkedIn) more than other professional figures (77%) in order to acquire visibility.
A typical day of an IFA is characterized by less competitive advantage and operating support than the average day of a FA with a mandate. The amount of time devoted to old clients (36% vs. 46% of FAs) is less than the amount of time dedicated to the acquisition of new clients (22% vs. 16% of FAs); on the other hand, the amount of time devoted to administrative and bureaucratic activities (25% vs. 18% of FAs) is higher.
Unlike FAs, IFAs tend to be lone wolves: 26% of them are reluctant to assist young colleagues or work as a team (as compared to 12% of FAs).
Overall, IFAs seem to have a bright future ahead of them: 40% of IFAs predict a rosy future for their profession, as compared to 29% of FAs and 9% of bankers.
Being an IFA is – perhaps more than any other profession – the result of choice rather than convenience. It is also the result of several previous experiences: indeed, before becoming IFAs, 16% of them worked as financial advisors, bankers (28%), or as employees entrusted with tasks unrelated to finance (56%).
What kind of future awaits IFAs? There are over 25.000 redundancies in Italian banks, financial consulting is increasingly widespread in the financial, succession and corporate field, real economy is becoming the new playground… And, sure enough, great opportunities await those brave enough to seize them.