Andrés Riquero and Luis Crespo present the keys to success and explain how agency models are formed in three countries. Commentary sponsored by AndBank.
Tribune by Andres Riquero and Luis Crespo, director and deputy director, respectively, of Agent Area, Andabank Spain. Commentary sponsored by AndBank.
Despite the fact that in recent years there has been a real boom in the number of agents in Spain, the growth rate can be considered modest compared to neighboring countries. For example, Italy has more than 33,000 agents, something similar can be found in England or America. Analyzing these three markets closely, we can see relevant differences:
The private banking sector in Italy can be classified into three sub-sectors: private banking departments of commercial banks, specialized banks (including foreign ones) and advisory networks, within which groups of people specialize in relationships with private clients. Advisor networks have existed since the 1970s as true bank-networks and are centrally managed using an agent model. They have grown tremendously over the last 20 years and we can estimate that they currently hold about 20% of Italian savings. The private segment of commercial banks is recent, let’s say within the last 20 years, and has evolved to counter the well-developed growth of advisory networks in an effort to retain customers.
Similarly, in Italy there are two main associations that represent these financial advisors: on the one hand there is the Assoreti, an association of banks and investment companies that provide investment advisory services and represent 78% of the 33,000 financial intermediary assets. On the other hand, there is Anasaf, established in 1977, which represents financial advisors authorized to offer their services outside their offices and currently has over 12,000 members.
Italian financial agents recommend 20% of domestic financial assets, approximately 750,000 million euros (data from Assoreti 2021). The association’s mission is to interact with competent institutions and authorities at European and national level on all aspects of regulation of financial advisory activities and investment services, to enhance and disseminate their knowledge and to improve relations with savers. ,
Private banking in the US has existed since the country’s inception and has played an important role in the US economy since its inception. They have undergone significant changes and regulatory reforms over the years. In this sense, private banks, which may be constituted as state or federal banks, are regulated by various state and federal agencies, such as the Federal Reserve, the Office of the Comptroller of the Currency, or the Federal Deposit Insurance Corporation. Industry experts suggest that the United States is seven years ahead of the old continent.
With respect to the market for independent advisors, the most relevant figure is the RIA, although we can find figures such as stockbrokers in the financial sector, who are professionals who limit themselves to attending to their clients’ buy and sell orders. are and which are regulated by it. Financial Industry Regulatory Authority (FINRA).
What are RIAs and how do they work?
Registered investment advisors (RIAs) are becoming increasingly popular in the United States, where financial advisors have separated themselves from larger firms in search of independence. An RIA is a personal financial advisor or advisory firm that manages the assets of wealthy, often high-net-worth individual and institutional investors.
RIA companies are registered with the SEC or state securities regulators, are subject to the Investment Advisors Act of 1940, and have a fiduciary duty to act in the best interests of their clients. Several independent RIA companies:
- They work with complex portfolios and meet unique needs that require highly personalized level strategy and investment management advice.
- They are owned by the individual advisors who run them.
- They provide advice and services for a fee based on a percentage of the client’s assets.
- They are fiduciaries, which means they are legally bound to act in the best interests of their clients: an outsourced chief investment officer (OCIO) can discharge this fiduciary responsibility by paying a fixed amount for this service. ) can be outsourced through.
What other activities do you do apart from portfolio management?
Generally, a financial advisor provides investment management, financial planning or wealth management. But if the client has specific requirements, you can hire consultants for project wise financial planning. Most advisors provide risk management and insurance planning, tax planning, philanthropy, treasury analysis, debt management or family office services, among other issues.
IFAs (Independent Financial Advisors) manage 80% of personal and household savings in the United Kingdom. Currently there are 27,839 consultants working in 5,118 firms, a reduction of about 40% in the number of consultants attached to banking institutions. The sector of financial advisory companies not only survived the RDR (Retail Distribution Review) but is currently experiencing its best moment.
RDR was created in the UK in 2013 by the FSA to improve protection and transparency for retail investors by prohibiting retrocession or the collection of incentives. Although initially, according to this law, the number of consultants decreased to around 10,000 professionals, this trend is changing in recent years due to the following reasons:
1) The presence of two figures with distinct roles and characteristics: independent financial advisors (IFAs) and restricted ones. The major difference between the two is that although an IFA can access a global universe of products, the latter works with a single provider or type of asset.
2) Improving the professional standards of consultants through the requirement of mandatory minimum certification.
Growth has been uneven between professionals and retail customers and there is reasonable doubt whether the legislation has achieved its objective ten years later. While financial advisory firms have favored the sector (advised income, profits and assets are currently at all-time highs), there has been a financial gap for retail clients, a limitation on investors’ access to qualified advice. break, mainly among small and medium customers.