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Advice the Italian way

In contrast to the British model, independent financial advisers that provide clients with a whole-of-market proposition are still a new sensation in Italy, with the majority of financial advice being sought from local banks. The closest mainstream equivalent to the British IFA is the Italian promotore finanziario, which translates to financial promoter, though these roles do have significant differences.

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Legally, like the British IFA, the promotore finanziario is trained to advise on third-party products and obliged to serve the client’s best interests. However, because they ultimately work on behalf of the bank, many have argued that recommendations are skewed to protect the interests of the promotore’s employer.

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Gareth Horsfall, a British financial adviser based in Rome, offers UK-style financial advice primarily to expats in the Italian capital. According to Mr Horsfall, the Italian financial advice profession is “underdeveloped and institutional”.

He said: “Advice is primarily institutional… [and] independent advisers do not really exist, unless at a high level such as family office or private bank. For the average man in the street, financial advice is provided through the traditional banking route, which is driven, in my opinion, by customers as well as the banks, in that trust among independents does not run high in Italy due to many financial scandals in the past.”

Promotori finanziari, according to Mr Horsfall, are bank representatives that offer a wide range of advice. In essence, they are trained financial advisers employed to offer whole-of-market solutions and their duties go well beyond the internal bank adviser, who generally just sells and advises on the bank’s own products.

Mr Horsfall added that Italian financial advice is limited by the lack of available investment products on offer, which means most tend to invest in traditional saving vehicles. He said: “Access to a range of funds, exchange-traded fund shares, funds, and so on, is wide, but certainly not as wide as the UK. The ability to invest £100 a month into a fund, for example, is not that easy based on high entry costs [and] the independent platform market, unlike the UK, is non-existent in Italy.”

In recent years, numerous former bank advisers, encouraged by the British and American advice models, have switched their attention to independent, fee-only services. Daniele Fiero, who recently left the banking sector after 15 years to start his own firm, is among those pressing for changes in how financial advice is delivered, having grown increasingly critical of how the major institutions operate.

Besides the great trust that Italian people have for banks, another big hurdle for independent advisers like Mr Fiero is convincing clients to pay an upfront fee. He said: “Financial advice is in the hands of Italian banks, who are restricting the financial advice fee-only model because they fear clients can become educated and realise the huge commission that is added to managed saving products.

“Having met clients in these years, I have noticed that the majority of them don’t know that they pay management commission or for the performance of their investments. When they ask about the real financial situation in the banks they are presented with all of the expenses after tax, which are obscured by the bank.”