It’s not quite a revolution but the arrival of independent financial advisers is shaking up old habits among Spanish investors and fund managers.
“I think it’s important because it offers independent advisory and in that sense it’s something that we are sponsoring with some initiatives together with them. It’s something we think is important for the market,” Bergareche says.
According to the CNMV, the new advisers account for just under €17bn of assets under advisory, though the actual figure is likely to be much more than that, as investors do not have to disclose all their assets to EAFIs when seeking advice.
It will take time for the EAFIs to build a bigger market share, but most participants believe this will happen as independent advisers become better known. It will also depend on the evolution of the market and on possible further regulation for the sector.
Paying for advice
One of the innovations introduced by the EAFIs is that professional advice should be paid for and this is a big change in what has been a deeply entrenched culture in which people paid for advice from their doctor but not for their investment.
The banks have played down the potential competitive threat from EAFIs, but most market participants believe it will bring more competition in the longer term.
Many of the new advisers previously worked for some of the major local and international banks and financial houses and they know many of the clients.
“There will be competition because their number is growing and these are people who have been working in those [bank] networks. They have close relations with the banks,” says Lorán.
Paloma Piqueras managing director asset management Europe at BBVA Asset Management, agrees that the EAFIs will create more competition, but she does not expect this will be significant for a long time.
“It will create more competition, but for the moment they are trying to find their space in the market. Now, with the markets as they are and the outflows that we have been having in the industry, I don’t know what has been their success,” she says.
The new advisers are not tied to any particular financial institution with some coming from major international and local asset management companies, who have decided to launch their own business.
Piqueras says the bank has an advantage with its wide network allowing direct access to clients. “What has been key for us is to be very close to our distributor, to our network and branches. We’ve devoted a lot of efforts in being close to our clients and being very transparent. We have a team of people that are responsible for helping people in the branches and in the bank, offering our products to their clients.”
EAFIs mainly compete for private banking and high net worth clients, with some focused on institutional business. It is for the individual wealthy client that the competition is likely to be strongest. A bank’s client may have an investment portfolio of €5m and 60% of that could be in bank products, so the competition to offer alternative products is likely to be fierce.