“Financial advice – Abolition of retrocessions not justified by a clear superiority of model”

“Analyze the topic in a broad and detailed way and avoid a priori positions, protecting both customers and the entire financial advisory industry”.

This is what Excellence Consulting proposes, which intervenes in the controversy that is animating the discussion both in Brussels and in most of the main EU countries. This is because the European Commission, through the Commissioner for Financial Services, Mairead McGuinness, as part of the design of the new EU Retail Investment Strategy legislative proposal, has proposed a ban on the retrocession mechanism which would impose on European countries where the “commission only” model is in force ” to switch to the “fee only” one, already adopted in the UK and Holland. The Excellence study compares the two models in an extensive and detailed way, focusing in particular on the characteristics of the Italian context compared to the British one, referring to data from Assoreti, and from the European Authority, ESMA, Consob and the counterpart FCA (Financial Conduct Authority) based in London, of the European Commission itself and of the annual research on the Wealth Management market of the Credit Suisse Research Centre.

In the opinion of those who favor the “fee only” model, direct remuneration for consultancy should reduce the conflict of interest in investment recommendations, while remuneration based on commissions retroceded to the distributor implies a potential conflict of interest in recommending more expensive investment products for the client. In the detail of the research, the provision in our country would have a significant impact on financial advisory services, mainly made up of listed banks/SGRs (Mediolanum, Fineco, Banca Generali, Azimut) or belonging to banking or insurance groups (e.g. Fideuram, Allianz Bank, Widiba, Che Banca, BNL Life Banker, Credem). The top six network banks by size in Italy have a market share of over 80%, a size of from 2,000 to 5,000 advisors (2022) and involve the majority of financial advisors which over the years have gone from 52.2 thousand in 2012 to 51.9 thousand in 2021 (source: Assoreti, OCF). In the United Kingdom, financial advice is mainly represented by consultants and consultancy firms equal to 76% of total employees, of which 85% are independent consultants (2020). However, the size of these companies is rather limited: 89% of them have fewer than five advisors (2020) and absorb the majority of financial advisors which over the years has increased from 35,000 in 2012 to 36.7,000 in 2021 ( Source: FCA).

If you go into the details of the synopsis, it is clear that there is not only black and white between the two models in terms of costs for the customer. Overseas customers pay the consultant an average of 1.9% (consultancy 0.8% + products 1.1% (FCA 2020). The cost of products has decreased after the introduction on 31 December 2012 of the RDR – Retail Distribution Review (the equivalent of our Mifid) which prohibited retrocessions, but there is no evidence certified by the FCA of the reduction in total costs borne by the customer, due to the simultaneous increase in consultancy fees. Italy, there is no Consob-certified data on the average total cost (consulting + products) for the client, however, the data from ESMA’s annual cost and performance survey of investment products indicate that fund management commissions in our country are higher in Europe, although it should also be mentioned that the trend in recent years is of a decrease.In 2022, ESMA recorded a TER (Total Expenses Ratio) for Italy of 2.05% for equity funds and 1. 19% for bonds.

Even with regard to cost transparency, the positive or negative aspects are not all on one side or the other. If it is true that the direct payment of a fee (fee only) for consultancy allows the client to evaluate the quality/price ratio of the service received, in our country it is true that there is no clear perception of how consultants are remunerated (40% of customers believe that the consultant is paid only by the bank, while 15% that he performs a free service – source: Consob, 2021), however it should also be mentioned that banks, in compliance with Mifid 2, must make available to customers the cost statement, with details of the customer’s expenses for consultancy and products.

The Excellence study also focuses on customers’ willingness to pay for a consultancy service. In the UK, 51% of adults say they would be willing to pay for investment advice ‘if the costs were reasonable’ (2020), while clients who did not seek advice would be willing to pay a fee if less than 1 % of assets (source: FCA). In Italy, about 70% of customers are not willing to pay for a consultancy service (2021, source: Consob), on the other hand the paid consultancy services successfully launched on the Italian market by the main players have now reached a diffusion average on customers not exceeding 30-35% (source: Excellence Consulting).

It should not be forgotten that different countries with different availability of resources and a different composition of customers are also compared. In the UK, the average financial wealth is around 140,000 dollars per capita (2021) and customers with wealth exceeding one million dollars are around 2,850,000 (2021). It is not cost-effective for advisors to assist clients who are wealthless than approximately $250,000 (2021, source: Credit Suisse, FCA). In Italy the average financial wealth is lower, around 117,000 per capita (2021), customers with wealth exceeding one million dollars are around 1,413,000 (2021). Commission-based consulting remuneration benefits small clients who pay a small amount in absolute value and comparable to other expenses they incur for other products or professional services.

“Our analysis – says Maurizio Primanni, CEO of Excellence Consulting – makes us understand that the two models both have strengths and weaknesses and that they are more or less suited to the different countries also according to their basic characteristics such as average pro- per capita, number of private customers vs. lower affluent and mass clients, clients’ willingness to pay for consultancy services, etc. With the research we have tried to introduce further evaluation elements into the ongoing discussion, including those related to customer behaviour, which does not always appear to be driven by cost alone. The case of Amazon can be a good example in this regard: on the portal of the Seattle company it is possible to purchase products both from Amazon itself and from other distributors, with the offers of the latter often also at lower prices, however, customers frequently choose the Amazon products for the undoubted advantages it offers in terms of the efficiency of its logistics model and customer care.”

“This work – declares Massimo Scolari, who supported Excellence in the collection of information – demonstrates that both models have pros and cons and that the best elements of both should be taken based on their ability to be drivers mutual efficiency, contextualizing them to the investment behavior and financial availability of customers. The comparison between the two systems, if it is to be objective and not biased, must consider multiple elements in order to have an overall vision. Neither system is perfect and both have costs and benefits. The legislator will have to choose the policy option knowing full well that unforeseen consequences can arise from every choice.”


L’Istituto del “Whistleblowing” è riconosciuto come strumento fondamentale nell’emersione di illeciti; per il suo efficace operare è pero cruciale assicurare una protezione adeguata ed equilibrata ai segnalanti. In tale ottica, al fine di garantire che i soggetti segnalanti siano meglio protetto da ritorsioni e conseguenze negative, e incoraggiare l’utilizzo dello strumento, in Italia è stato approvato il D.Lgs. n.24 del 10 marzo 2023 a recepimento della Direttiva (UE) 2019/1937 riguardante la protezione delle persone che segnalano violazioni.

Il decreto persegue l’obiettivo di rafforzare la tutela giuridica delle persone che segnalano violazioni di disposizioni normative nazionali o europee, che ledono gli interessi e/o l’integrità dell’ente pubblico o privato di appartenenza, e di cui siano venute a conoscenza nello svolgimento dell’attività lavorativa.


(*) Campi obbligatori