Financial advice vs on your own: the numbers speak for themselves

The profession of assisting retail clients in effectively allocating their money returns an indisputable long-term advantage.  According to research by Excellence Consulting, over the past ten years, the networks of financial advisors of major players, such as Banca Generali and Mediolanum, have created more value for their clients than those who have gone it alone.  Because since 2012 financial wealth for Italian households as a whole has risen annually by 1.2%, a figure that falls to 0.1% if the annus horribilis of 2022 is included. While for the customers of the six main networks the annual increase was 3.3% from 2012 to 2021, a figure that decreases to 0.5% if one includes last year when stock and bond markets went down by an average of 20%.

Complicated years, especially if we consider the presence of two 'black swans' such as the Covid pandemic and the Russian invasion of Ukraine, which led to a profound reshaping of international value chains and their impact on global trade. Yet the tailor-made consultancy on the assessment of risk-return dynamics has held up, providing added value compared to those who tried to disentangle themselves in the magnum sea of markets by attempting to disintermediate networks by lowering costs and commissions.

The study, which processes data from Assoreti cross-referenced with those of the Bank of Italy, shows how the value of the financial wealth of Italian households, net of that of the clients of the top six financial advisor networks, rose from EUR 3,762 billion in 2012 to EUR 4,180 billion in 2017 (of which + 178 in savings) to EUR 4,697 billion in 2021 (of which + 335 in savings) to EUR 4,315 billion in September 2022.

Different multiples instead for clients of advisor networks: wealth grew from EUR 223 billion to EUR 376 billion in the 2012-2017 period (of which about EUR 128 billion due to net inflows), to over EUR 540 billion in 2021 (of which about EUR 114 billion due to net inflows), while it fell to about EUR 515 billion (of which EUR 37 billion due to net inflows) in 2022, with an excellent performance by Banca Generali. The growth in the value of the financial wealth of the clients of the Networks' financial advisors, expressed as a compound annual capitalisation rate (CAGR), is 2.1% from 2012 to 2017, becomes 3.3% from 2012 to 2021, while from 2012 to 2022 it falls to 0.5%.

In Italy the average financial wealth is lower, about 117 thousand per capita (2021) when compared to the European average and the British model. Commission-based advisory remuneration therefore benefits small clients who pay a small amount in absolute value and comparable to other expenses they incur for other products or professional services.

The top six network banks by size in Italy have a market share of over 80% and involve the vast majority of financial advisors, who over the years have risen from 52.2 thousand in 2012 to 51.9 thousand in 2021 (source: Assoreti, OCF).