Spanish savers have seen how their money has not given them benefits for a few years. After the elimination of the salaries of the savings accounts and the zero profitability of the deposits, those who trusted these last products now face the possibility that the bank charges them for keeping their money. This threat has caused many to consider whether they should move their savings and opt for riskier options, such as equity investment.
However, Juan Abellán, professor of the Master in Banking and Finance of the Institute of Stock Market Studies (IEB), emphasizes that the situation has not changed in the short term. “Before they thought they earned something because they were paid 1%, but in reality, 20% of that benefit was left by the Treasury and inflation was above 1%, so they lost money year after year,” he explains. However, he has now changed his vision to the possibility of having to pay some kind of commission.
The entities are trying not to lose these clients, who could withdraw the money, launching a commitment to investment in equities. Proof of this is the recent campaign of Banco Santander among some of its clients, whom it encourages to “incorporate something more risk” into their portfolios. However, Abellán emphasizes that this strategy is not new and the banks have been trying to transfer the deposits to the investment funds for years and it seems that they are achieving it. “The assets of the funds have improved a lot and money has been moved to these products and portfolios,” said Enrique Borrajeros, president of the Communication Committee of the European Association for Financial Advice and Planning (EFPA) in Spain. This is the case of Ibercaja, which confirms that there has been an increase in equity investment through funds, or CaixaBank, which in 2016 launched its discretionary portfolio management proposal, offered through the Smart and Money Portfolios. With these investment models managed by professionals, the objective of the sector is to reach a positive situation for all: the bank earns at least 1% and the investor obtains profitability of his savings in the long term, explains Abellán.
In any case, the client must be aware of the risk involved in abandoning deposits and investment in fixed income and opt for equities, information that must be provided by the entities, as established by the Mifid 2 regulations. The client must overcome a suitability test and a convenience test, composed of a set of questions that determine the previous knowledge and experience of the client, as well as their investment objectives and their financial situation and therefore, their level of risk, explains the National Market Commission of Securities (CNMV). Based on the resulting data, the Mifid-certified advisor will inform the client of the available funds that fit his profile. In fact, Francisco Sanz, head of private banking at Ibercaja, stresses that the bank cannot “allow the client to invest in something that is not suitable for him.”
The formative work in the financial sphere of the entities is arduous, since they face a conservative client, who prefers that their savings be maintained and does not look to the long term. “It is very difficult to teach a society that comes from deposits and investment in fixed income,” Abellán emphasizes. In addition, he adds that advanced work in this regard may collapse with spikes in equity volatility, as happened at the end of 2018, which cause the retail investor to flee, for example, to the real estate market or deposit.
- Purchase of assets. The riskiest bet, they affirm in Ibercaja, is to invest in one or several concrete values. The client opts for companies that he knows and assumes that the risk is zero, but the reality is that he is not as informed as he should, they explain.
- Investment funds. Investing through investment funds of a specific manager allows the client to diversify and entrust their savings to a professional who will place them in different assets and different markets. The investor must pay fees, the management commission and the depository, which are charged directly to the fund and, therefore, subtract equity from it.
- Discretionary management of fund portfolios. This service “allows the investment strategy to be adapted to the changes that occur in the environment, without losing sight of the objective to which they respond and reducing the risk associated with emotional investment decisions,” they explain in CaixaBank. The manager will invest in its own funds but also from third parties. The client must pay an explicit commission for this management, in addition to the commissions of the aforementioned funds. However, the first rate makes many retail clients choose to invest directly in funds, where they are not so aware of commissions.