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The Italian Financial Advice Market 2005

Product Type: Market Research Report
Published by: Datamonitor
Published: April 2005
Product Code: R313-8404
Description
Introduction
Financial advisers hold a large part of the financial services distribution market in Italy. However these advisers are tied or multi tied agents of the product providers. The growth of a significant independent financial advice channel would require both regulatory change and a change in the attitude of consumers to the financial advice channel.

Scope
This brief covers the Italian market but gives crucial background information about the wider European market
It covers the market share held by financial advisers in the mutual fund and life and pensions markets and forecasts forwards
It includes analysis of the market for financial advice, including types of advisers, key products and leading associations
It contains survey information drawn from interviews with more than 20 key financial advice companies in Italy
Highlights
According to FECIF Italy has around 35,000 full time professional financial advisers employed outside the banking sector, the third largest number in Europe behind Germany and the UK. There are also a substantial number of people who offer some financial distribution services while this is not their main profession.

The SIM networks are an important part of the retail mutual fund distribution landscape in Italy. This channel has held approximately 10% of mutual funds distribution between 1998 and 2003, but dropped from a substantial 22% in 1996.

Datamonitor believes that developing public demand for independent advice, particularly amongst the most wealthy will drive some growth in this area and draw some business away from the SIMs, which currently dominate the market for financial advice in Italy but are not fully independent.

Reasons to Purchase
Understand the attitudes and opinions of key players in this crucial distribution channel in order to market to it more successfully going forward
Size the proportion of the life and pensions and mutual fund products currently being sold through this channel
Assess the importance of this channel for distribution strategies going forward
Table of Contents
TABLE OF CONTENTS

EXECUTIVE SUMMARY 3

Market context 3

Financial advisers and their attitudes 3

The Italian Financial Advice Market 4

INTRODUCTION 15

What is this report about? 15

Definition of an independent financial adviser 15

The independent financial advice market is growing rapidly 16

Who is the target reader? 16

How to use this report 17

MARKET OVERVIEW 19

Introduction 19

Key findings 19

Banks continue to be the most important channel for the distribution of financial services products in Europe 20

Banks hold more than 50% investment and protection distribution 20

Tied and multi-tied agents are an important force in European financial services distribution 20

Insurance company employees are declining in importance in the European market 21

Brokers and independent financial advisers have had a limited role in European financial services distribution 21

The European financial advice market is highly fragmented 21

Europe remains some distance from developing a pan-European financial advice market 23

Lack of consumer demand and lack of legislation have deterred the development of pan European competitors. 24

Technological and regulatory change will encourage the development of some pan-European competitors going forward 24

Product providers will push the market for financial advice in Europe in the next five years 25

Pan-European Financial Advice Associations and Standards bodies are attempting to unify the European financial advice market 26

Financial advisers are somewhat more important in the mutual fund than in the life and pensions markets 29

Independent advisers hold around 8% of mutual fund distribution in Europe 29

Independent advisers currently hold a small part of life and pensions distribution market 30

Private pensions are the products with the potential to have the biggest impact on the European financial advice industry 31

The private pensions market is yet to deliver results for financial advisers 31

The life-based investment market has become less attractive 31

Hedge funds and fund-of-hedge funds are starting to figure for financial advisers 32

Structured and derivative-based products are growing rapidly in popularity in Germany 33

European regulation presents a major threat to the fledgling financial advice market in Europe 33

Financial advisers are in danger of regulation overload 33

Professional indemnity and capital adequacy ‘double whammy’ will put up to 30% of financial advisers out of business 34

The Financial Services Action Plan (FSAP) will radically change the regulatory environment in Europe 35

Independent advisers’ core customers group - the wealthy and financially aware - continue to grow in number across Europe 37

The affluent market in Europe continues to grow 37

European consumers are becoming more financially aware 38

Data 39

EUROPEAN FINANCIAL ADVISERS AND THEIR OPINIONS 42

Introduction 42

Key findings 42

Financial advice firms in Europe are typically small and independently owned 43

A minority of financial advisers surveyed are owned by product providers 43

Most financial advice firms have less than 20 staff 44

Financial advisers in Europe focus on developing a close relationship with a focused customer base 46

The French and Spanish financial advice markets are particularly highly focused on affluent customers 46

The pre-retirement market is key for financial advisers in Europe 47

Many financial advisers have expatriate customer bases 48

Close relationships are crucial to financial advisers’ success 49

The key to financial advice in Europe is direct contact between the adviser and the client 49

Customers with whom advisers are in frequent contact dominate revenues 51

Customers breed customers: the majority of new business in the financial advice channel comes through customer referals 52

Equity-based investments are the most important products for financial advisers in Europe 54

The dominance of commission is an issue for the European financial advice market 55

86% of financial advisers’ business is commission-based 55

European consumers don’t want to pay for financial advice 56

The preference for commission-based selling increases the danger of mis-selling 57

European advisers are technologically aware, but providers are yet to take advantage 57

European financial advisers are not technophobes 58

Most financial adviser-to-provider communication continues to be directed through traditional channels 59

Providers need to focus on service in order to appeal to financial advisers 60

Data 62

THE ITALIAN FINANCIAL ADVICE MARKET 69

Introduction 69

Key findings 69

The Italian financial services distribution market has three major channels 70

Recent years have been turbulent for financial services distributors in the Italian market 70

Banks gained easy business in the 1990s 70

Financial advice firms showed their strength in the market downturn 71

SIMs dominate the Italian intermediary market 71

SIM sales forces provide the main channel for third party mutual fund distribution in Italy 72

Independent advisers and brokers hold a tiny part of the life and pensions market 73

Despite consolidation in the financial advice market in 2003 and 2004 many of the smaller competitors in Italy are still independently owned 73

The larger financial advisers are owned by providers 74

Several large SIMs dominate the intermediary market in Italy 74

Financial advisers in Italy are primarily equity-focused 75

Equities and mutual funds account for 60% of financial advisers’ sales in Italy 76

Italy is the largest market in Europe for wrap-like products sold by financial advisers 77

The life and pensions markets offer advisers opportunities now and more to come 77

Financial advisers’ sales of innovative products remain limited 78

Government bonds continue to play an important role for Italian customers 78

More than 50% of Italian financial advisers offer open architecture in mutual funds 79

The Italian government is considering adding to its regulation of the financial advice market 80

The government is considering legislation to make it easier to offer fully independent financial advice 80

Government is looking to make product distribution more transparent to cut charges 80

Italian advisers have a long way to go to convince the public 80

The wealthy will begin to turn to independent advice over the next five years 82

THE FUTURE DECODED 87

Introduction 87

European financial advisers show muted optimism 88

Datamonitor believes that the next five years will see independent financial advice start to gain a foot-hold in the major continental European countries 89

APPENDIX 92

Supplementary data 92

Definitions of investment and protection distribution channels 96

Insurance company employee 96

Tied agent 96

Multi-tied agent 96

Independent financial adviser 96

Independent broker 97

Bank/ bancassurer 97

Other 97

Other definitions 97

Research methodology 99

Datamonitor’s European Financial Advice Survey, Oct 2004 99

New Consumers Insights European Consumer Survey October 2004 99

Future readings 99

SPP writing team 100





LIST OF TABLES

Table 1: Financial intermediaries in Europe (individuals), 2004 39

Table 2: Financial intermediaries in Europe (firms) 2004 39

Table 3: Share of the mutual fund market held by financial advisers, 2003 40

Table 4: Share of the life and pensions market held by independent financial advisers, 2004e 40

Table 5: Professional financial advice associations by country France, Germany, Italy and Spain 2004 41

Table 6: Ownership of European financial advisers 62

Table 7: Average number of client-facing staff per firm in European financial advice firms 62

Table 8: Average number of customers per financial advice firm (percentage of financial advisers) 63

Table 9: Proportion of financial advisers’ client base in different asset bands 63

Table 10: The financial advice market in my country is focused on high net worth individuals? 64

Table 11: Proportion of financial advice customers in different age groups 64

Table 12: Proportion of financial advisers whose client base includes expatriates 65

Table 13: Proportion of communication between client and financial adviser by channel 65

Table 14: Proportion of financial advisers’ business by customer type 66

Table 15: Channels used by financial advisers to gain new customers 66

Table 16: Proportion of financial adviser business by charging structure 67

Table 17: Technological hardware used by financial advisers 67

Table 18: Factors in financial advisers’ choice of product provider 68

Table 19: Italian consumers: To what extent do you agree with the statements? 81

Table 20: Italian consumers: Which source of information would you most rely on if you were considering... 84

Table 21: Italian financial advisers: who owns your company? 84

Table 22: What percentage of your current customer base has assets of? 85

Table 23: What proportion of your sales comes from the following products? 85

Table 24: Italian financial advisers: How many providers' products do you offer in the following areas? 86

Table 25: Financial advisers view of the future of their market 91

Table 26: Percentage of life and pensions new business sold by independent financial advisers 91

Table 27: Total individuals offering intermediary financial services by country, additional countries, 2004 92

Table 28: Professional financial advice associations by country, additional countries, 2004 93

Table 29: Financial advisers’ perceptions of their reputation, 2004 94

Table 30: To what extent do you agree that financial advice is a growing element of the financial services distribution market in your country 94

Table 31: Which statement is most true about financial advisers in your country? 95

Table 32: Proportion of different products sold by European financial advisers, 2004 95





LIST OF FIGURES

Figure 1: The European Financial Advice Market, report process 17

Figure 2: Germany has by far the largest number of financial intermediaries in continental Europe, 2004 22

Figure 3: Germany has more financial intermediary firms than any other European market, 2004 23

Figure 4: German financial advisers hold the largest proportion of the mutual fund distribution market, 2003 29

Figure 5: Independent advisers hold 10% or less of life and pensions distribution in the major European countries, 2004e 30

Figure 6: Most financial advice firms in Europe are independently owned, 2004 43

Figure 7: Only a small number of financial advice companies have more than 20 employees, 2004 44

Figure 8: Germany has the largest proportion of large financial advice companies, 2004 45

Figure 9: More than 30% of financial advisers’ clients are High Net Worth 46

Figure 10: The Spanish and French financial advice markets are concentrated on the pre-retirement age group 47

Figure 11: A large proportion of financial advisers in France service expatriate customers 48

Figure 12: Face-to-face and telephone communication remain the dominant forms of communication in the financial advice market 50

Figure 13: Financial advisers gain most of their revenues from customers with whom they have frequent contact 51

Figure 14: How do you go about finding new customers? 52

Figure 15: Mutual funds and stock broking are leading activities for European financial advisers 54

Figure 16: What proportion of your business is on average? 56

Figure 17: On average financial advisers’ computers are 2-3 years old 58

Figure 18: Telephone remains the most common means of communicating with providers 59

Figure 19: Service is more important than performance or commissions to European financial advisers 61

Figure 20: Italian SIMs have lost market share in Italy, 2003 72

Figure 21: Although financial advisers in Italy must have links with providers, many describe themselves as independent 74

Figure 22: Italian financial advisers are often also stockbrokers selling execution-only equities 76

Figure 23: A large proportion of Italian financial advice firms offer a wide spread of providers across product areas. 79

Figure 24: Italian consumers focus on their own research or financial advisers 82

Figure 25: Confidence in the future of the financial advice channel is muted among financial advisers 88

Figure 26: Most European countries can expect strong growth in the financial advice market over the next five years 90
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