We have been in MiFID II for a few months now, and if you have any investment funds, it is inevitable that you have had to do a MiFID test or go to sign a consulting contract with your bank. What is sought is that there be more transparency and protect your interests as an investor, so that the investment recommendations presented to you are appropriate for you.
But in the end, will all this help improves the counseling service we receive? Is it just another normative process to continue doing the same as always? Is the conflict of interest in banking financial advice really going away? I tell you what I think.
From the outset that banks position themselves as non-independent financial advisors, it says a lot. Although the truth, with so much paperwork and so much normative procedure, it is difficult for someone to find out much that all this is going. To what extent does it protect me more than my bank declares itself as a non-independent financial advisor when submitting an investment recommendation?
I get the feeling that we are still the same as we were. Now the bank or other financial institutions have to fill in more screens, and you have to ask more questions, and you have to get more papers. But in the end, everything is, sign here, here and here. And you don’t know what you just signed. But you have hired the fund that the entity has recommended. That supposedly has verified that it is convenient for you. But that does not mean much less, that it is the best option, nor the one that interests you most.
The investment recommendation of the bank advisor may be convenient, so that the advisor is exempt from liability, and maybe the option that most benefits the entity.
So? What the hell is all this about? In the end, you can continue to strain a bad fund or investment product, which is still the most interesting for the bank because they have already told you in advance that they are not independent. Do they excuse themselves by saying something like? What did you expect? If you go to Renault to buy a car, what do you think they will teach you? A BMW? Well, with the bank the same. If you come to Bank X, they will sell you funds from Bank X, but that doesn’t mean they are the best, nor the best options for you.
We continue with the Stockholm banking syndrome. We are kidnapped, and the vast majority do not know where to go or what to do to get an impartial and adequate investment recommendation.
Does it sound critical? May. But a very obvious fact is that many of those certified financial advisors know what they offer (or should know). On this occasion, they are bound by regulations, for that they are asked to obtain a professional accreditation. And precisely for that reason, because they know what they present to you, many do not invest in the products they sell.
And I ask you, would you dine at ease in a restaurant where the cook does not eat the food that is used for dinner? If the manufacturer or seller of the financial product does not seem good enough to put his money, why would it be for me? This is what is still happening today, very widely.
Your bank advisor may tell you that your financial goals are yours, that he wants the best for you, and that he is here to help you. But it is hard to believe that even today, these bank advisors have bosses who continue to pressure them to get more and more clients to put their money in-depth because of the bank’s income and the profitability of the bank’s disinter mediation are going down. Do you really think they care about you and your money? Actually, it has to be difficult to work in a bank today.
More enlightening is the fact that 90% of the funds sold by banking networks are 70% more expensive than what an index fund would charge you and are incapable of beating the index like the one compared in the long term. Rightly, more than 85% of fund managers or teams do not invest their money or invest significant amounts in the funds themselves on which they make investment decisions. So it is difficult to align interests, don’t you think?
How is it possible that the vast majority of savers and investors in this country are still subject to this system and do not make the decision to act and take their money elsewhere? Many people with whom I speak, tell me some of the stumbling blocks that your financial institution has done to them and transfer their deep suspicion to the banks. And they complain about bad investment recommendations. However, most do not change banks.
Why? Well, partly because of conformity. Also for the overwhelming advertising bombardment. The custom and laziness. All of this means that in the end, many remain with the drift of the pack that leads them to the slaughterhouse. And they still bleed their pockets while complaining without doing anything.
Who can you trust? There is hope?
Not all personal financial advisors are bad. Not much less. The bank advisor, by any certificate, is in the constant conflict of having to betray your trust and appeal to your emotions so that you hire what interests the bank and not you. Well, it charges at the end of the month thanks to what the bank earns from its sales. And that is precisely the key, from whom the financial advisor charges. Of you or the product? The morals and ethics of the employees, sometimes worth what the bonus and the incentives they charge at the end of the year for it. And some sell cheap.
Without a doubt, there is no better guarantee of good intentions, of those who invest their money with yours. And in that, the independent house managers, who are also usually partners of the firms, set an example.
The other option you have left is to spend hours training and learning minimally how to manage your money. Or at least know how to distinguish when there is a conflict of interest, and it is advisable to carefully analyze the investment recommendation that they are proposing to you.