Retail investors in Italy have historically turned to their local bank and trusted financial consultant, as they are known locally, to help them put their money to work.
It is not uncommon for the same bank or financial institution or even financial consultant to look after the same family for generations.
In a country where independent financial advisers have only recently come onto the scene, combined with a general reluctance to trust anything techy or digital, it is not hard to see why robo-advisers have struggled to gain ground.
But the covid-19 pandemic has flipped these traditional notions and habits upside down.
According to a December 2020 study by the School of Management at the Politecnico di Milano, the lockdown months saw a 6% increase in the number of clients signing up to robo-advisory services, as well as turning to other fintech and insurtech solutions.
The robo space was already growing in Italy, however, with London- and Milan-based Moneyfarm partnering with the Italian national postal service to offer digital wealth and investment solutions to Poste Italiane’s clients.
This is because the postal service offers both banking and investment services, on top of the more standard mailing and shipping.
To understand what the increasing interest in robo-advisory means for the Italian financial advice space, International Adviser spoke with Moneyfarm and PwC Italy.
A digital need
Mauro Panebianco, partner at PwC Italy, said: “According to a PwC study updated to the first quarter of 2020, wealth managers are making more effective use of technological innovations in relationship management.
“Social distancing has meant that people can no longer go to places where they usually buy or sell financial products, and the need to do everything remotely has accelerated all the technology involved in digital signatures, paperless- and remote communication.
“In short, it has led the industry to rethink a more virtual and less physical model of interaction.
“All this has focused attention on the rise of robo-advisers, leading to a greater positioning on passive and low-cost products, the use of apps and the web, instead of the bank counter or financial adviser.”
But Giovanni Dapra, co-founder and chief executive of Moneyfarm, believes that the pandemic has only accelerated what was already an existing interest and trend towards digitisation, which has undoubtedly put the traditional sector under pressure.
“Over the past year, more and more people felt the need to focus on their financial situation and often they found the answers to their questions online.
“It’s not surprising that digital-native financial service companies have seen their customer base growing significantly. This has happened in Italy, as well as in other countries. Data shows that Italian investors are tech-savvy, and they are ready to embrace the financial services of the new generation.
“What is peculiar about the Italian market is the prominence of high street banks’ distribution networks. Investments are seen by most customers as a relational matter, meaning that they trust the person that their family has trusted for years.
“This model is now under pressure.”
Dissatisfied from the traditional
Dapra explained that many Italian investors no longer see value in turning to financial institutions.
“First, more and more people are starting to realise that there is a gap between what they need in terms of advice and what they get from the bank.
“Second, these distribution networks are very expensive, and the costs are ultimately borne by investors, since investing is by far more expensive in Italy than in most European countries.
“Third, new regulations, such as Mifid II, are pushing the system towards innovation, with an impact similar to the one RDR had in the UK. Fee-only advisory is still marginal in Italy and is championed by companies like Moneyfarm and other robo-advisers.
“For all these reasons, more and more people are reconsidering the ways in which they invest their money.
“In Italy, our customers are generally older than in the UK, mainly people in their 40s or 50s, dissatisfied by the service they get from traditional institutions.”
A dying breed?
Does this mean that the role of the financial consultant will disappear, eventually?
PwC’s Panebianco doesn’t think so.
“For the Italian market, the human adviser is still considered fundamental. In fact, a survey conducted in May 2020 by PwC, in partnership with the Politecnico di Milano, showed that face-to-face meetings are still the most common mode of interaction, followed by telephone conversations.
“And meetings at the branch remain the most widespread point of contact even among young people in 63% of cases.
“The financial adviser, therefore, does not seem destined to disappear.
“In terms of customer retention, the professional and relational aspects are equally important, or even more so. For instance, the ability to create a stable and lasting relationship of trust and to present complex information in a clear and simple manner, are very difficult to replicate by a virtual consultant.
“If we add to this the fact that the most appreciated professional skills are, so to speak, ‘human’; we can understand why a robo-adviser is unlikely to replace a person.”