The financial adviser is already “wealth-based”. So why isn’t his remuneration model?

A worried client calls his adviser because the technology fund he invested in has lost ground and dragged down his investment portfolio’s performance. The adviser, naturally, needs to know what happened and explain it clearly; ignoring the markets, in fact, would be a professional flaw. But one may wonder why a saver to whom the adviser has conveyed the values of planning and risk management should even ask such a question, unless he has understood why he invested there in the first place, what percentage weight that asset has in the overall portfolio, what the investment horizon is and, finally, when he will need the money and whether he can afford to see it fluctuate today because it is meant for the long-term allocation bucket.

The concern would not even be justified if the investor, in eighteen months’ time, has to pay for a child’s education and thinks the money must be taken precisely from that segment. So what has ALREADY happened when the client called the adviser in a state of worry? To answer, we need to take a step back and draw a clear distinction between knowing the market, which helps us understand what happened, and knowing the client, which instead allows us to understand whether something needs to be done or whether we simply need to wait. It is in this second step that the real work of any financial adviser is measured (whether independent or not), and the issue is whether the two categories operate in a context that is favourable or unfavourable to this view of the profession.

How much market does an adviser need?

What is the point of checking every day how a fund is performing, where it stands in the rankings or how many stars a rating agency has assigned to it? It matters if it helps verify that the instrument is still doing the job it was chosen for: taking on a certain exposure, containing a risk or performing a specific function within the portfolio. A disappointing return may reveal excessive costs or management that has drifted away from expectations, just as a strong result may be due to a concentration the client does not even know he has. The question becomes sterile when the comparison between products comes before the comparison between objectives. If each quarter you look for the fund that has done best, you may end up replacing what has just fallen with what has just risen, without having clarified which client problem you are actually solving.

The same applies to the major investment themes: artificial intelligence, the silver economy and the space industry can help shape a reflection on how the economy and the demand for capital will change; on their own, however, they do not tell us how much to invest, at what price and with what risk. A family that already holds many technology shares through global funds could increase an existing concentration while thinking it is adding a new opportunity. Gold, in turn, raises a different question: what role should it play in the wealth, and under what circumstances might it fail to play that role? These are asset allocation questions, but asset allocation itself comes after a more important decision: which resources are destined for which projects, with which deadlines and with how much room for the unexpected?

Same professional method, different relationship with the intermediary

Private banker, senior banker, junior banker etc: the titles tell us about responsibility, experience or client segment, but the useful distinction for this discussion is another one. The financial adviser authorised to offer services off-premises works on behalf of an intermediary; the independent financial adviser belongs to a different section of the register. In turn, independent advice is a way of delivering the service, with its own requirements: it is not simply another name for someone registered as independent. An intermediary can offer it if it meets those requirements. This distinction matters because the debate does not end with a single professional deciding to leave a network: it also concerns the forms of advice the network chooses to offer.

Why, then, should the professional method start from different questions? An independent adviser must know instruments and returns just as well as a network colleague, and a fee alone does not guarantee sound planning. In the same way, being mandated by an intermediary does not prevent the adviser from getting to know the family in depth, following it over the years and advising against action when no action is needed. The key issue is how much room the business model leaves for that method when the best recommendation does not generate revenue from a product. Think of a client who should reduce debt, keep liquidity to support an elderly parent or postpone an investment until an inheritance issue is settled. How is the professional who gives him the most useful advice - namely, to do absolutely nothing - paid for that work, even though he has met with the client, analysed the issues and given his professional opinion?

What makes good planning?

Net return matters. It must be measured together with costs, risk and available time, because an excellent relationship does not justify an unsuitable portfolio. But wealth planning also produces significant results that do not show up in the annual return percentage; for example: the family knows where to find the documents in an emergency; the spouse who has never dealt with investments understands what resources are available; a child knows why some money has been set aside and other money can be invested. In a difficult phase, the client has someone who already knows his situation and can help distinguish an urgent problem from a reaction to volatility. And when a tax, legal or inheritance issue emerges, a good adviser knows how to recognise it and involve the right professional, without pretending to be a notary, lawyer or accountant.

The growing interest in the role of financial educator also says something about how the profession is changing. AIEF says it has more than 1,900 members in its register: the figure refers to registered educators and does not allow us to determine how many are network advisers. It does, however, indicate that there is an organised professional space for financial education, beyond the conversation about a single investment. For an adviser, educating means making the client better able to ask questions, read costs and understand the consequences of a decision, even when the client involves family members or decides not to subscribe. If this work is part of the relationship, it is worth asking whether it should remain an activity the professional indirectly finances through what he sells.

Why is it difficult to change the way advice is paid for?

Not all networks remunerate professionals in the same way, and the management fee on a fund is not the same as what the individual adviser receives. Assoreti’s guidelines distinguish several forms of compensation and incentives, including recurring and non-recurring components. The economic point remains: when a significant part of relationship revenue comes through financial instruments, the client may perceive the advice as free even though he bears the cost indirectly. For the network, those flows also finance infrastructure, support and controls; for the adviser, they are an income stream that cannot be replaced overnight. Moving to an explicit fee means making clear what is being paid for, who is providing the service, how much work it requires and whether the client is willing to renew it.

The transition would also be difficult on the client side. Someone who has never received an invoice for a wealth review might see it as an additional cost. That objection would be well founded if the new fee were simply added to the previous costs without a reduction or a clearly separate service. On the other hand, even a percentage fee on assets, although separate from the sale of funds, can create an incentive to keep assets that the client could use better elsewhere, for example to repay a debt. The issue, therefore, is not solved by changing the name of the commission. It requires comparing the overall cost, the service received and the incentives: a project-based advisory service, an annual retainer and a fee proportional to assets meet different needs and deserve to be judged for what they reward.

Is the client with €50,000-€100,000 ready for wealth planning?

The hypothesis is that the market is more mature than part of the industry assumes, even in the €50,000 to €200,000 range of financial assets. For a family with €150,000 of investable resources, a home it owns, an elderly parent and an inherited property held in co-ownership, the main issue may be preserving liquidity and handling some imminent family obligations, before even choosing a fund to invest in. Looking only at investable assets, that family may appear to be a mid-tier client; looking at the decisions ahead of it, it may need structured wealth advice.

After all, which adviser would be ready to bet that a certain prospective client has no goals of any kind? No one, obviously, because everyone has life goals and projects to build. For clients with movable wealth between €50,000 and €200,000, one could start with services that are understandable and affordable even for those who do not belong to the wealthiest segment: a wealth assessment, a retirement plan or an annual review of goals, each with a declared scope and price. The interesting answer would be to see not only how many clients accept the first meeting, but how many come back and pay because that service helped them make a decision. If there is demand, the network can discover it by offering a recognisable service; if there is not, it is necessary to understand whether the obstacle is price, content or the fact that the client still sees advice as something received together with the product.

How many years does the current bank-network model still have ahead of it?

The question perhaps should be split in two: how long will non-independent adviser networks last, and how long will a model that remunerates advisers according to product remuneration last? Networks may have a future precisely because of their ability to manage relationships, their local presence and the resources they make available to advisers. What remains to be seen is whether they will use these advantages to charge for a service whose value is understandable even in a year with no new subscriptions. The test, for the network as for the independent adviser, is the same: if the best advice is not to buy anything, does the client still recognise the value of the work done? And does the economic model recognise it in turn?