“It is time for regulators to investigate sales practices at banks”, says Madison Marriage, Journalist for the FT.
According to Cerulli, a research company, 90 per cent of the money that entered Europe’s fund industry between 2009 and 2013 went to independent asset managers.
This figure raises the disconcerting question of whether the “open architecture” model many banks claim to have adopted, which involves selling the best funds to retail or wealth clients, including products from external asset managers, has collapsed.
Unsurprisingly, banks say they continue to promote the best products to clients, including those that have been carefully selected from their competitors at independent asset management houses.
Last year, Madison Marriage interviewed four of the large banks that claim to use an “open architecture” model and asked them what percentage of funds sold to private banking clients were in-house products. None of the banks including Morgan Stanley, Credit Suisse, Goldman Sachs and Deutsche Bank were willing to share the data.
Guillaume Prache, managing director of BETTER FINANCE says that the average retail client “will only have in-house funds proposed as there is such a strong economic incentive at banks to recommend in-house funds”.
Brussels has attempted to limit the extent of self-serving fund sales at banks under new European rules known as MIFID II. But there are concerns that banks will be able to circumvent these rules.
Please read the full article from the FT here.