Spanish banks funds market dominance likely to endure
As Madrid attempts to open up the retail asset management market to newcomers, expectations remain that the banks’ hold on the local market will not diminish soon.
The hold of a handful of large Spanish banks over Spain’s retail asset management market is unlikely to loosen soon in spite of government efforts to encourage newcomers.
Only two banks, Banco Santander and BBVA, together account for about one third of the local funds market, with the top five banks holding about 55% of the market.
Legislation allowing for independent advisory firms called EAFIs (Independent Financial Advisory Company) was passed last year, raising hopes it would open up the market. The legislation prohibits anyone or entity from giving investment advice without obtaining prior permission and being registered with the market regulator.
But Ana Rivero Fernández (pictured), head of product and market intelligence at Santander Asset Management (SAM), says this has had a very limited impact.
Though not to be caught short, Santander and other major banks have applied for the wider European Financial Adviser certification.
“With this, we can also show clients that we have this kind of qualification for selling products similar to EAFIs.
This is more the trend than entering the EAFIs.” The banks’ market dominance also reflects investor conservatism.
“Retail clients who are the bulk of the market are really very conservative in Spain. Equities are not in their DNA.
“If they invest in emerging markets or in sectors such as US equity, it’s for a while – for a year, a month. They want guaranteed funds, they don’t want volatility.”
This leaves little scope for selling exotic or very sophisticated products. About 75% of fund investments are in guaranteed money market and semi-money market funds, leaving a quarter of the market left for equities and other investments, says José María Concejo, Allianz managing director country manager for Spain & Portugal.
In other parts of the world, specialist advisers and independent firms have a bigger share of the market and investors are more likely to seek their advice. In Spain, according to Rivero, “the banks have the branch networks and thus the best access to individual investors. When we talk about the retail business, it’s mainly banks and savings banks.”
This may seem an unhealthy limit on competition, but Rivero says it has distinct advantages for clients.