Abstract Report - CONSOB AND ITS ACTIVITIES
Report 2024 on financial advisor-investor relationship
Mirroring survey
The Report analyses the advisor-client relationship, in order to detect possible information and knowledge distortions for an increase in the quality of dialogue and awareness between the parties. The analysis is based on a questionnaire administered to two samples, consisting of financial advisors and their clients/investors respectively.
| The 2024 Report The Report analyses the advisor-client relationship in order to detect possible information and knowledge distortions. ... more |
| In continuity with the 2020 edition of the survey, the advisor-client relationship was explored with reference to the specific topic of integrating so-called ESG factors (Environmental, Social, Governance) into the financial advice process. Given the crucial role played by the industry in informing savers and promoting interest in sustainable investments among them, it is useful to analyse evidence on the dynamics at work in the advice sector and, in particular, in the interaction between professionals and their clients. The analysis, as usual, is based on a questionnaire administered - between September and December 2023 - to two samples, consisting respectively of financial advisors and their clients/investors (mirroring survey). Through a comparison between investors' opinions - as perceived by financial advisors - and the opinions actually declared by clients, the survey delves into several profiles related to: i. the interaction between professional and client (Section 1 of the Report), ii. the knowledge and diffusion of sustainable investments (Section 2) and iii. the factors that can prompt such investment options (Section 3). The measure of 'alignment' between 'perceived' by professionals and 'declared' by investors offers indications as to the areas that could benefit from an intervention on the information exchange or interaction modalities that would elevate the quality of the relationship, the service offered and the client's investment choices. |
| The matching indicator The questionnaire underlying the survey is formulated in such a way as to allow a mirror-image survey of clients' knowledge, opinions and behaviour, on the one hand, and of the advisor's perception of these profiles, on the other. ... more |
| In detail, the questionnaire consists of 19 pairs of questions addressed to the investor and his/her reference advisor (in addition to five questions addressed to the advisor only and a series of questions for profiling respondents); for each pair, a matching indicator is proposed which punctually measures the alignment between the answers provided by the clients and those provided by the relative advisors, and assumes a value of 1 if there is a full correspondence between the advisor's answers in relation to his/her clients and the answers provided by the latter, and 0 if there is a total mismatch between the advisor's perceptions in relation to his/her clients and the answers provided by the latter (for details on the type of questions and the methodology underlying the construction of the indicator, see the Methodological notes). |
| The areas of advisor-client interaction where there is the highest level of alignment and those on which the main dystonias occur A cross-sectional reading of the Report and of the matching indicators makes it possible to identify the issues on which there is greater or lesser alignment between the opinions expressed by investors and advisors. ... more |
| A higher degree of agreement emerges when information is collected on the approach to investment (in terms of attitude to risk and objectives pursued, for example) and on the use of the advice service (with reference to the perceived benefits of interacting with the advisor, for example; Section 1), while the most significant dissonances are recorded when it comes to exploring the drivers of sustainable investment (i.e. the factors that may affect the propensity towards this type of investment, such as the information available, the range of products offered, the prospects for returns; Section 3). In particular, a substantial alignment - with matching indicators close to 0.8 - is recorded when clients and advisors are interviewed about time horizon, risk aversion and loss aversion; on the whole, advisors show themselves to be aware of investors' propensity towards medium- to long-term investments and their attitude to think in a portfolio perspective and to accept temporary contractions in the value of invested capital in the light of long-term return prospects. Despite the fact that advisors are on the whole aware of how low knowledge and lack of information can discourage investors' interest in sustainable investments, when the factors that can stimulate or restrain the uptake of sustainable products are explored, the matching indicator falls to the lowest level; for example, professionals tend to underestimate how much the propensity towards sustainability can be restrained by reduced familiarity with the range of available products. This result is not surprising if one considers that the integration of sustainability factors in the investment process, and thus in the advisor-client interaction (in particular, at the client profiling stage), is a relatively new phenomenon that even in the oldest relationships has only recently become a topic of discussion and dialogue. |
| Conclusions The participation of advisors in the survey contributes to an overall information picture in which the industry perspective emerges strongly and clearly. ... more |
| In the diffusion of sustainable investments, the professionals who participated in the mirroring survey play a key role and interact with clients with increasing awareness. Compared to previous editions of the survey, there appears to be a greater focus on surveying clients' ESG preferences, seen as an opportunity to dialogue with investors and raise their awareness of sustainability issues. At the same time, clients' adherence to the survey allows the overview to be completed with additional perspectives that highlight the value placed on the advice service as well as the interest and inclination towards sustainable investment. In particular, the survey highlights how important it is for advisors to support their clients' sensitivity to sustainability issues by providing a clear and comprehensible illustration of the range of products on offer, and to support them in acquiring information on the actual achievement of environmental, social and governance objectives linked to individual products/issuers; this would, at the same time, help reduce the fear of greenwashing as well as confirm the reliability and competence of those who advise these products. A further area of possible intervention concerns the need to reinforce the investor's knowledge and expectations by fostering a more in-depth exchange on the characteristics of the recommended products and the chosen portfolio allocation. The professional's contribution to the financial education and sustainable finance education of investors would have the additional effect of strengthening the reliance on the advisor and the relationship between him/her and his/her clients. |
|
Summary of the main evidence |
|
This Report was prepared by:
Paola Soccorso - CONSOB, Research Department (p.soccorso@consob.it)
Massimo Caratelli - Università degli studi Roma Tre (massimo.caratelli@uniroma3.it)
The opinions expressed in the Report are the authors' personal views and are in no way binding on Consob.