IDEAL ADVICE

Forces of change Our recommendations focus on three main forces of change to increase the quality of financial advice: industry self-regulation, prudential regulation, and education. Improving the quality of advice is a multi-dimensional endeavour that needs to be addressed through a balanced approach between these three forces of change.

to improve the quality of advice in order to give investors the right financial solutions for their needs. Our analysis is based on extensive desktop research, discussions with numerous experts, product advisors and detailed findings from two surveys: the PwC/CACEIS Financial Advisor/Distributor Survey 2010 and the PwC/UCL Investor Survey 2009 (see Appendices for further details on the two surveys). The focus of this paper is on the advice demanded by and offered to individual investors in Europe. Advice to institutional investors is not included in the scope of this report on the basis that most institutional investors have internal buy-side analysts and usually deal directly with the asset managers. We analyse the advice on and the distribution of collective investment products in Europe as a proxy for the distribution of other financial products: e.g. certificates, whose distribution patterns and characteristics are more opaque. For the scope of our study and the Financial Advisor/Distributor survey we have included universal banks, private banks, insurance companies and IFAs. We define investment products as insurance and pension reserves, investment funds, quoted shares and debt securities, specifically excluding real estate, currency and deposits.

Three forces of change

Self- Regulation

Regulation

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Education

Figure 2

Greater levels of industry self-regulation are absolutely critical in order for financial organisations to ensure that their advisors deliver the best advice possible for each investor. Clear commitments from market players to act in their clients’ best interest as well as to abide by effective controls would benefit investors and boost the reputation of the industry as a whole. Initiatives to set up internal codes of ethics, clearly label products, and improve the transparency of services offered and related pricing have already contributed to improving the quality of advice delivered.