A Framework for the Compliant Added Value of Financial Advice

Paolo Sironi and Maurizio Ravezzi

Full transparency on costs and charges incurred by investors is a regulatory pillar of the whole advisory process. Understanding the scope of regulatory reporting on costs and charges allows advisers to demonstrate added value for switches and product selection within the MiFID II Suitability Framework. The Suitability Framework does not solely require a reporting upgrade, but a revolution in business models, which forces the industry to transform its role from that of a distribution channel of products into that of financial-advice packaging where on-boarding and in-boarding can be autonomous sources of added value for clients.

INTRODUCTION

Final investors are not always able to understand the relationship between costs, financial risks and expected/potential returns. The existence of an information asymmetry has allowed the industry to establish a competitive oligopoly in which financial firms have long fought each other via product competition, embedding similar costs, rather than providing innovative services at significantly lower prices. Nowadays, a global regulatory change is lifting the veil of asymmetric information, albeit with differences, and forcing those in the