Online investment advice: a "robo-advisor" for your savings?
"The big question is whether it is better to regulate this new world of online finance, especially when it comes to advice" resumes Guillaume Prache. “Financial advisers are regulated, but since advice now also comes from non-financial players we find ourselves in a legal limbo. Do online advisors follow the basic rules regarding information and ethics that apply to traditional players?
- De Tijd: Een ‘robotadviseur' voor uw spaargeld?
- L'Echo: Conseil en ligne: bientôt un "robot-conseiller" pour votre épargne?
Investments: an industry that must reform
"Investors could still reasonably expect a personalised service at a private bank, adapted their specific situation. That, indeed, forms the basis of private banking," says Guillaume Prache, managing director of BETTER FINANCE. "And yet this is not usually the case. Because of the prevalent economic model, the client will not be offered the best adapted products from third parties. A typical example: index funds deliver excellent performance and are particularly interesting for investors. Yet they are almost never offered, because of their low cost structure which is not attractive to administrators.”
L'Echo: Placements: une industrie qui doit se réformer
De Tijd: De beleggingsindustrie is aan hervorming toe
Private bankers in the EU: commissions continue to be authorized
"In most EU Member States, private banking services are provided by large integrated financial groups or networks. There is an overriding temptation to offer "house brands" because the system is based on commissions," says Prache.
- L'Echo: Banques privées dans l'UE: les commissions restent autorisées
- De Tijd: Private bankers in de EU: commissies blijven toegestaan
Still too many conflicts of interest in private banking
"As shown by studies by the AFM, the French financial regulator, index funds with a very low cost structure are rarely offered to clients, despite the good returns that these products achieve, because they don’t generate commissions," said Guillaume Prache.
- De Tijd: Nog te veel belangenconflicten bij private banking
- L'Echo: Encore trop de conflits d'intérêts en banque privée
European Savings: poorly managed, poorly regulated
Over the 10-year period studied by BETTER FINANCE, the European funds achieved returns on average of 1.2 percent below their benchmark index, the pan-European Stoxx Europe TMI Index. The bond funds underperformed by about 0.8 percent and balanced funds even failed to compensate for inflation and therefor generated a loss of 0.1 percent in real terms. BETTER FINANCE concluded that the investment industry does not create any added value for savers. The federation adds that high fees do not offer any guarantee of a better quality of management.