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Quo vadis financial advice ?

Financial advice is a non-paid service in the Czech Republic, but it does not mean that it is for free. May the clients be sure that they get fully professional and independent service if it is not them paying the adviser but the financial institution?  In Great Britain, it was imposed by the law, that it is the client who pays the financial adviser directly. It improved the professionalism and independence of the advisors.  Swiss Life is preparing to expand in the new segment of financial advice.

In terms of attitude to financial advice, we can divide potential clients into 3 groups. Those who:

1. do not want any advice and they can deal with their finance themselves

2. want to use the advice, but for free

3.  are willing to pay for advice

The current system of sales of financial products in the Czech Republic has led to the expansion of the second group of clients. Is there at all any potential for the third group? Why should clients pay for the service?

Financial advice is a non-paid service in the Czech Republic but it does not mean that it is for free. Banks and insurance companies reward financial advisers to sell their products and thus de facto outsource their distribution costs. May the clients be sure that they get fully professional and independent service if it is not them paying the adviser but the financial institution? May this service 'for free' be too expensive because it directs the client to inefficient product? The system existing in the Czech Republic leads to the fact that there is a large number of advisers in the market whose professionalism and independence is often questionable. It is likely to suit financial institutions. Therefore they have no interest to change this system even if they declare something else.

How is the client to know who is the right and who is not? To ensure independence, it is necessary that there is no difference in the commission of the same product from different financial institutions and advisory company selects from the market, what really is the best, regardless of the commission. Moreover, it requires continuous education of the advisers and supply of high-quality information, both to advisers and clients.

And what is the experience from abroad? An interesting example is our sister company Chase de Vere from the UK. The State cancelled all commissions for selling products by legislation and consequently, financial institutions have to provide distribution of their products themselves and cannot use a third party for this purpose. Advisers are rather independent because they are paid by the client indeed. They can use the low-cost products too. It automatically leads to a significant improvement of the service because the market maintains only the most experienced and the most professional advisers who bring the client the highest long-term added value. However, the service is not available for everyone because not everyone is willing to and able to pay for the advice. The change has helped our British sister company to get many awards (see https://www.chasedevere.co.uk/about-chase-de-vere/awards.aspx) and to become one of the most sought-after financial advisers on the market.

It is certainly not possible to introduce paid consultancy into the market in large a measure without a change of legislation but I believe that the number of clients who would appreciate the service has been significantly growing in the Czech market. Swiss Life have already been extensively preparing for the new trend and have perceived a potential for future growth there.