The changing face of the Italian adviser
The distribution of funds is changing in Italy, highlighting the role and definition of independent advisers.
It is often suggested that the Italian promotore finanziario is an equivalent of the British independent financial adviser (IFA). However, while the Italian financial industry tries to align itself to more European and sometimes Anglo-Saxon models, there are significant differences between the two.
From a legal point of view in Italy, there is no substantial difference between the job of a promotore finanziario and that of an independent financial adviser, because both are obliged to meet suitability requirements with regards to what is in the client’s best interest.
However, there seem to be differences between those advisers working for banks and those working for a Società di Intermediazione Mobiliaria (SIM), or for a fee-only firm.
According to those in the industry, the promotore finanziario is the traditional adviser who works for a bank, while the financial adviser, as meant in, say, the British sense of independent financial adviser, is the one who does not provide his advisory service in such a setting.
Marco Tofanelli, chairman of Italy’s association of financial advisers Assoreti, says: “Both the promotore finanziario and the independent financial adviser provide advisory services in line with the client’s profile. However, the first does it on behalf of a party [normally the bank], while the second does it independently.”
Tofanelli adds that it is difficult to compare a promotore finanziario to an independent financial adviser, because the two profiles operate under significantly different circumstances.
“While a promotore acts on behalf of big industrial brands with a high number of clients, the independent financial adviser in Italy works, at the moment at least, in very small teams or rather completely independently,” he says.
Meanwhile, the role of advisers is undergoing a profound change and a heated debate is taking place in Italy as a result. European Union regulations, such as Mifid and Mifid II, are playing a key role in reshaping the jobs of promotori finanziari (the plural of finanziario) in the country, as well as clients’ perceptions of investments.
Law introduced in 1991 introduced the idea of a so-called Unified Financial Text, which defined the role of the promotori finanziari.
For the first time, they were able to provide advisory services against fees. It also helped identify the individuals working within financial firms that would be able to provide advice on external, or third-party products and services. Until that point, they had only worked to advise on internal products, for example, within banks.
In the opinion of a number of Italian advisers, the link between banks and their internal advisers has created a strong conflict of interest, and in practice has caused many promotori finanziari to leave their jobs at banks to join either SIMs or fee-only firms to be able to provide what in their opinion is “a more ethical advisory service”.
Giovanni Pedone is an analyst at Consultique SIM, a fee-only firm based in Verona that offers advisory services to a wide range of both private and institutional clients.
Pedone sees a substantial and unavoidable conflict of interest in the role of those financial advisers working for banks and says that firms such as his are better positioned to offer services.
“Consultique aims at applying the American model of financial advisory and is a very peculiar reality in the Italian scenario, where the majority of services are still provided by the banks,” he says.
“Although I think that many financial advisers who work for the banks are professional people who act only in the client’s interest, I still believe that there is a clear distinction between our service and theirs. Banks’ financial advisers will never be completely neutral in the advisory service and they will always be pushed, to different degrees, to lean more towards the banks’ core products.”
Pedone adds that the Consultique model has struggled to establish in Italy, but is adamant that this is where the market will head in future.
Gabriele Rossi, financial adviser at Copernico SIM in Rome, believes that the future of financial advice needs to be fee-only, but he acknowledges that a cultural change must happen in the country for that to happen.
Rossi, who previously worked as financial adviser for Deutsche Bank Group’s Finanza&Futuro, decided to join Copernico SIM to be able to meet what he feels ought to be professional standards, and provide a service more in the client’s interest.
“Copernico SIM does not have its own products to suggest and that allows me to work both on commission and on a fee-only basis,” he says.
“I firmly believe in the multi-family office British model, where product distribution is left to the bank and the financial advisory service is more independent.”
However, as Rossi highlights, Italian financial culture needs to change for such a model to be fully implemented.
He says: “Banks’ financial advisers in Italy traditionally have a commercial/sales background and don’t normally have a university degree. The generation of financial advisers I belong to is instead made up of people who went to university and studied finance and economics.”
In Rossi’s opinion, the advisory service should be taken away from banks. But for that to happen, Italian clients’ attitudes towards financial services should be turned upside down too.
Daniele Fierro, another financial adviser who recently left the banking sector to found his own firm, thinks that Italy’s financial culture may not be quite ready to leave space for independent advisers to gain ground.
“I worked as financial adviser for Banca Intesa and Ubi Banca Private Investment for years and just recently I’ve set up my own firm,” he says. “However, the hardest part is always to persuade clients to pay you an annual fee for your job and that’s because Italian clients are very accustomed to banks.”
In response, Fierro recently considered opening a TV channel for financial education programmes in Foggia, the area in Southeast Italy where he now works.