An article which appeared in the Belgian newspaper L’Echo discusses the reticence of Belgian citizens to take risks with their savings.
Guillaume Prache (BETTER FINANCE) and Jacques Berghmans (Treetop Asset Management) discuss why this is the case and what the potential solutions could be.
Belgians don’t trust bankers to invest on their behalf. As Mr. Prache explains, bankers get rich thanks to the commissions and fees they charge on the funds they sell. Since it is in their interest to sell the products with the highest fees, they don’t always have the best interest of their clients in mind and the lack of confidence should not come as a surprise. Besides fees, taxes further reduce net returns on investments with, for instance, life insurance taxed at 2% on premiums and charging entry fees of up to 6%. Furthermore a persistent lack of transparency can lead to serious misunderstandings on the part of investors.
From 1900 to 2014 the global stock market reported an average of 5.3% return taking in account inflation; bond yields on average were 1.9% per year and interest rates for saving accounts rates were lower than inflation. Mr. Prache highlights the importance of long term investment and diversification in the struggle for better returns, high enough to cancel the effects of inflation.