Because the financial vulnerability of Italians is growing
A new push to evolve is needed for financial advice. That's how. The analysis by Andrea Rocchetti, Head of Investment Advisory at Moneyfarm
The latest Consob Report on the wealth of Italian families strongly underlined how much the vulnerability of families has increased due to the crisis triggered by the Covid-19 pandemic. About 30% of the interviewees declare that they are unable to cope with an unexpected expense of 1,000 euros and just over 30% say they have suffered a reduction (temporary or permanent) in their income in the last year. About 47% of respondents report having contracted a debt, mainly with financial institutions. 35% of the sample reduced their expenses and more than 10% affected their savings. Yet, reading the data of the Italian asset management industry, both in absolute terms and in relation to 2019, everything could be said of 2020 except that there was a year of crisis. In fact, in 2020, the Italian asset management system as a whole went from record assets of 2,280 billion to over 2,393 billion euros (Assogestioni data updated to November 2020). And, in particular, for the networks of financial advisors, the 2020 data available so far show a marked improvement compared to 2019 (an already very positive year): in November, net inflows amounted to over 37.7 billion, albeit in part coming from mere liquidity. Networks therefore had a very important weight for the savings industry in 2020 as their contribution to the entire funded assets accounted for almost 80% (Assoreti and Assogestioni data).
HOW HAS THE ITALIAN INVESTOR CHANGED? TRUST IS GROWING IN THE FINANCIAL CONSULTANT, BUT FINANCIAL EDUCATION REMAINS LACK
Assets under management are growing and the net demand for financial advice is also growing, with approximately + 14% compared to 2019 (Consob Report on the wealth of Italian families – December 2020), which therefore reduces the main deterrents to advice itself: mistrust and lack of perception of the added value of this service. Investors who relied on financial managers and advisors before making an investment choice in 2019 were 30% and they became 41% in 2020. 40% of investors in 2019 decided in total autonomy how to invest their savings. while this year the percentage dropped to 29%. Furthermore, from another Consob report ( The consultant-client relationship – December 2020 ), it emerged that in identifying the distinctive features of consultancy, investors more frequently cite the notion of “serenity” (85% of cases). At the bottom, on the other hand, are the fundamental tasks of a consultant such as "control of investment risks" and, above all, "control of investment costs". It could not have been otherwise since over 40% of investors, in 2020, (page 48) do not even know they are paying for the advisory service they receive. Although costs are the only certain (and controllable) variable of each investment, this concept is undermined by an awareness that is unfortunately still not widespread about their application.
In general, Consob confirmed that also this year the financial education of Italians remains limited although slightly improving. The share of respondents who correctly answer questions on basic financial knowledge ranges from 38% (concept of diversification) to 60% (risk-return ratio). Fortunately, the aspect on which the interviewees would like to receive more information concerns “how to invest your savings” and in this they show confidence in financial intermediaries more than in anyone else (page 32). In Moneyfarm, this evidence is confirmed by the 2020 data: the time spent by consultants on the phone grew by 75% compared to 2019, and exchanges via email and chat also significantly increased (+ 43%). Over a million new users arrived on the Moneyfarm blog in search of information and traffic grew by 122% compared to 2019, the same applies to the use of highly informative videos with over 55,000 hours of videos played in 2020. + 85% compared to 2019. The Company closed 2020 in clear growth, with + 40% of assets under management (for a total of approximately 1.4 billion euros) and + 49% of new customers acquired.
ABUNDANCE OF LIQUIDITY: THE ROLE OF CONSULTING
In October 2020, public debt in Italy reached 2,587 billion and liquidity to over 1,700 billion. Beyond the actions with which the state seeks, on the one hand, to raise cash and, on the other, to stimulate consumption and a more efficient use of wealth, liquidity is increasingly an asset to be valued and exploited. In addition to the opportunity cost of investing, it is necessary to keep in mind the negative rates, the potential risks (especially for significant amounts) and the costs (including tax) to which the assets parked in current accounts are subject. It is no coincidence – Consob always tells us (page 44) – whoever invests their savings with the guidance of a consultant tends to leave a less important portion of their assets in liquidity.
This evidence, together with the good degree of satisfaction collected by the advice among those who actually received it – 66% of clients under advice in 2019 decided to use it again in 2020 (page 45) – should show all savers the way more virtuous in the management of its assets and, for the Italian savings industry, the need to activate some important levers to continue to improve. The crisis triggered by the pandemic contributes to exacerbating the challenges related to some structural changes in advanced economies such as the aging of the population and digitalisation. Overall, the impact of the various pandemic restrictions on financial services customers has been very clear: digital has seen a major acceleration on all fronts and the effects will be lasting. For the asset management industry, it is therefore a question of making advanced, digital, simple and efficient solutions available to the greatest possible number of savers. Digitization brings (or should bring) great benefits such as low costs and flexibility, in fact, even in the management of savings without compromising their quality and always offering its customers the guidance of a consultant. In this regard, the Consob report recalls that one of the main reasons why savers do not turn to a consultant is that they have small capital available (page 47), while to motivate them to digital consultancy would be precisely the possibility of having a consultant in flesh and blood (page 56).
Making an appointment with the consultant, in the Moneyfarm experience, doubles the chances that a customer will actually start investing and, with the same declared assets, leads to an average initial investment higher than 40%. Furthermore, giving continuity to this relationship over time makes the client more faithful to his investment objectives and more inclined to increase the investment over time: the additional annual investments are 3.5 times higher (always with the same declared assets).
In summary, good financial advice is the one that, through technology, cuts costs without compromising the quality of your service. In Moneyfarm, thanks to an innovative digital approach combined with advanced consultancy, a service has been democratized that in traditional industry is still reserved for a few investors, with the aim of constantly providing those answers of proximity, accessibility, real-time monitoring. results and immediacy, which end customers are now looking for and appreciating more and more. In this perspective, it is essential to encourage and facilitate access to information on one's investments and above all to those concepts of financial education that are not understood by the vast majority of savers.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/perche-cresce-la-vulnerabilita-finanziaria-degli-italiani/ on Sun, 24 Jan 2021 14:24:00 +0000.