FinecoBank has recently pocketed 673m from its IPO in the Italian stock exchange. Though the direct bank of UniCredit has not launched a separate wealth management unit, it has had a solid influx of wealthy private clients over the years. Valentina Romeo talks to the bank’s CEO Alessandro Foti to understand the bank’s avant-garde strategy
FinecoBank, UniCredit Group’s direct multi-channel bank, is Europe’s biggest online broker.
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Launched as a brokerage platform first, then turned into a bank, Fineco started its wealth management activities in 2008. Currently, it is Italy’s third largest private banking network by assets.
However, Fineco has not launched a separate private banking offering.
"Our firm has always been characterised by an almost manic research for the best possible services to offer to our clients," says Alessandro Foti, CEO of Fineco.
Thus, through the years, there has been a natural migration and entrance of private clients into Fineco, Foti continues.
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By GlobalDataInitially, Fineco had 5,500 private clients and was holding 6.5bn ($8.06bn) in assets under management (AuM). As of September 2014, Fineco has 13,000 private banking clients and 14.8bn in AuM that is 37.2% of the bank’s total AuM (48bn).
Fineco’s position in the Italian private banking landscape is among the top tier. However, "it has never worn the private banking label," explains the CEO.
Fineco can count on over 5,000 products and more than 64 investment houses and it is the only direct bank to offer fee-only services. Almost none of Fineco’s competitors are able to leverage a similar funds platform range, according to the lender.
Foti, who is also head of Asset Gathering at UniCredit, says clients with over 500,000 investable assets are now becoming moreinterested in the substance rather than appearance when it comes to banking.
"The search for luxury chandeliers and buildings – traditionally attributed to private banks – is rapidly giving space to what’s more concrete instead: a correct management of portfolios, efficient services and full transparency," he says.
Finding the perfect model
According to Foti, financial planning used to considered a "second class" distribution model compared to traditional banking.
However, since clients are shifting away from branch-based services and getting more interested in financial planning, banks are reacting to the new trend.
According to Foti: "Fineco is the only Italian and European player that managed to successfully combine digital transactional platforms of banking and brokerage with the interaction of Personal Financial Advisors (PFA)."
Outside Europe, only players such as US’s Charles Schwab got close to Fineco’s offering, Foti says. In Italy, the closest business models are the pure direct banks such as ING Direct, for instance.
Another Italian player, UBI Banca, is currently trying to replicate Fineco’s model by merging its online IW Banca with the advisory network UBI Banca Private Investment, Foti can reveal.
As the demand for financial planners’ mobility is clearly on the rise, UniCredit is asking to more than 800 employees to take the required examination to become professionally accredited advisors. Banca Intesa is doing the same with more than 2,000 of its bankers.
The wealth advisor power chain
Within its PFA network Fineco identified 140 Wealth Advisors in order to better answer to the specific needs of its private clients. Foti explains that clients between 500,000 and 10m have many differences and so have their advisors, which can count on an ad hoc training and on partnerships with tax and law firms.
However, Fineco doesn’t separate the network of specialised wealth advisors from the rest of its financial planners.
"Unlike competitors, we have also chosen not to separate wealth advisors from the main network. The integration brings a lot of positive energy to the business," Foti says.
Fineco also launched the Wealth Advisor Forum in 2013, which promotes specific educational schemes for advisors on family governance, asset protection, real estate asset management and more.
Bi-directional growth
For Fineco, the importance of strategic client acquisition is paramount. The bank is currently planning to acquire around 100,000 new clients including mass affluent and private clients.
According to Foti the referral route in the private banking segment still has a "crushing impact" as "we are talking about a number of clients that is not endless."
Overall, the bank acquires nearly 35% of new clients in one year through referrals.
Another distinguishing growth strategy for Fineco is around staff recruitment. The bank plans to acquire nearly 130 personal financial advisors annually, though Foti says this move is not meant to substitute the organic growth of the bank.
"We are simply boosting our engine size. Despite the crisis, in Italy you have extraordinary savings activity and clients keep opting for modern investments options," says Foti.
With more than 3.7trn wealth invested in financial assets, approximately 93% is still in the hands of traditional banks, but a slice of it is moving to firms like Fineco.
Investment vs planning
Foti says wealthy families in Italy have more capital than income because of the low economic growth of the country. By this respect, wealth management has become an essential choice for them.
"These families cannot afford a ‘sloppy’ management of their savings anymore. The search for wealth planning is becoming more important than investing as clients are looking for long term solutions and we need to strategise accordingly," Foti explains.
He says Italian HNWIs, at the beginning of the financial crisis, started with extremely unbalanced portfolios on Italian assets – mainly in government and bank bonds.
"In 2011 they found that their ‘risk-free investments’ were losing around 10-15%. They needed to exit their comfort zone and the name of the game became diversification," says Foti.
On top of regulation
Much like the RDR in the UK, MiFID has stepped up in continental Europe to standardise regulation and eliminate any conflict of interest in the distribution chain.
Fineco had already introduced the concept of fee-only advisory service in its model. According to Foti, clients consider it a more transparent service and recognise it as one that needs to be remunerated.
Foti says: "The fee-only financial advisory model has been welcomed by the market while in the past no one would have thought Italian investors would ever pay a fee. Things are definitely changing now."
