From its launch in 1999, FinecoBank has been a leader in the distribution of multi-brand mutual funds through an online platform in Italy.
TRANSPARENCY A PRIORITY
Transparency and low costs are key strengths for the Fineco proposition, says Pennino.
“Our administration and execution costs are among the lowest on the market. Our platform has hundreds of funds with 0% commission.
For other funds, we have set standard fees across all investment houses, varying only according to the asset class (equity, balanced, bond, cash).”
Fineco differs from a funds supermarket in two respects. The first is that the group screens the funds houses it includes on the platform, with the aim of including only the best in class, so restricting the choice available to its clients.
Fineco is one of the largest in Italy, having more than 4,000 funds from 60 funds houses.
By contrast OnlineSIM, a classic funds supermarket, offers 3,000 investment funds from 120 funds houses.
The second distinction is that Fineco styles itself as a bank, with financial advisers to guide their clients’ investment decisions. Being able to offer financial advice is a key element to Fineco’s business proposition, as it offers “added value”.
OnlineSIM, acquired by the Ersel group in 2004, is execution-only, offering its clients web tools to help them make their investment decisions, though no financial advisers to guide them. The first step of Fineco’s selection process is a quantitative screening process.
Mostly, the funds being considered have to have a track record of three years or more, though the investment committee is open to considering new funds if they are innovative or “interesting” in one way or another.
This policy stems from the idea that not all funds can be classified in an absolute way, giving Fineco the freedom to select according to quality rather than size.
The second step is the qualitative test, examining the range of funds and the manager.
If during the screening process the Fineco fund selectors find a few funds of interest belonging to a funds house, their policy is to take on board the whole family of funds to increase the options available to the financial adviser.
Having a complete range of funds offers flexibility in times of difficulty – for example, when an investor wants to simply switch from equities to bonds or cash. Otherwise, the only option is the more expensive one of divesting.
“Nobody can be a master of all trades,” says Pennino. “What is important is to understand the characteristics and the management style of each manager, making best and most appropriate use of them at the right time.
“Well-diversified portfolios can benefit from both the big funds houses, generally more solid and structured, as well from the boutiques, which tend to be more flexible and more dynamic.
“To ensure clients are always offered high-quality products, you have to have the best managers who are specialists for each region, sector and style. In that sense, those that do not have a multi-brand offering have greater difficulty justifying the choice of manager and performance of the product.”
Fineco operates a buy list, but does not rank the funds on its platform. A ranking is only a snapshot in time of the market because the market is ever-changing.
To rely on a fixed list of approved funds might not be as accurate as it might suggest.
Fineco prefers to focus on the each fund’s characteristics, which may or may not be useful to an investor at any given moment.
A clue to Fineco’s estimation of a fund can be found in the amount of information available on their extranet portal, available to their financial advisers.
The funds they consider to be the best will have more information, videos, fact sheets and other data on the portal.
If Italian investors are turning to online investing in growing numbers, it is because it enables them to obtain a cheaper, more efficient way to access the markets, coupled with a greater choice of investments. But they still want advice, says Pennino.
“In most cases, investors continue to rely on their financial advisers, especially if these have no conflicts of interest, for advice on the best products in an increasingly sophisticated financial world.”