Josep Soler: "80% of savings is invested with very low returns, below inflation"

BarcelonaJosep Soler, founder and executive advisor of EFPA Spain (Spanish Association of Financial Advisors and Planners), believes that there is a need to improve financial literacy, one of the tasks he has been promoting for years. Furthermore, an effort must be made to incentivize, through taxation, citizens to move from saving to investing.

One of the pending issues in this country is financial literacy. Have we made progress?

— We are advancing, but too slowly.

Why?

— We have an immense universe of people who should improve economically with financial literacy. Everyone makes financial and financial health decisions. And we are moving very slowly with the improvement of this aspect.

What do countries that could serve as a reference do?

— Anglo-Saxon countries have been improving for longer and, above all, they have a culture of risk and saving, and of understanding that savings must be converted into investment if savings are to serve any purpose. They are much more advanced than the rest of the countries in continental Europe.

Saving is a static concept and investment, dynamic, isn't it?

— Yes. In Spain, and in Europe in general, we save. Of course, there are many people who cannot save, but globally a considerable amount is saved. And, in recent years, we have also considerably increased the savings ratio.

Why?

— Because there has been more employment. We save, but the placement of this saving is terrible. It's not that there's 40% in deposits and current accounts, which, moreover, in the Spanish banking and financial sector, generates practically nothing, no; it's that of the other 60%, what is theoretically invested, is invested in very conservative options. In investment funds, there is a brutal dominance of guaranteed conservative funds or those with short-term fixed income. There is also a very important part of insurance which, by rule, must be invested in a very conservative manner. Therefore, perfectly, 80% of financial savings is invested with very low returns.

Below inflation?

— Indeed. Losing purchasing power. And savings that, in general, cause a loss of purchasing power, is a drama because no use is made of them. Saving is very important, but the government does not dare to say that public pensions are fragile (and I am being moderate). We do not dare to say that it is increasingly essential to supplement them. Not because we have to privatize them. No, no. Supplement them because the trend is that these pensions will be lower or more in danger each time. That's all. And, therefore, we should encourage people and we should give them facilities.

What kind of facilities?

— Incentives, which, let's not fool ourselves, must be fiscal. Consequently, if, on the one hand, we have low financial literacy and on the other we are poorly advised... Quality financial advice still doesn't reach everyone. And, furthermore, there are few incentives, fiscal ones. Unfortunately, it continues to be unproductive savings. Quite unproductive. And you might say, well no, this money that people put in banks serves perfectly to then give loans and be invested. But, by regulation, banks tend to invest in low-risk loans. With little innovation. That is, closely monitoring risk because they are obliged to do so in this way. And, therefore, we would need, like the Anglo-Saxons, to have more alternatives alongside bank financing. And this is what we are missing.

He was saying that we are ill-advised; doesn't the figure of an independent financial advisor exist?

— We have improved a lot, but not enough. They must be of higher quality, more autonomous, and not to mention more independent. Independent means they must charge the client. And let's not fool ourselves: here no one wants to pay a financial advisor. For example, we are willing to pay a doctor, if necessary; but not a financial advisor. "This financial advice thing is free - we think -. The banks have always given it to me for free. They advised me, I don't know well or badly, but they advised me and, therefore, there was no need to pay." Consequently, here no one is willing to pay for advice.

And the solution?

— We should be more subject to fiduciary duties, which are common in the Anglo-Saxon world. Even if you are an employee of a bank, if you adhere to fiduciary rights, you have to prioritize the client's interests. In the case of doctors, there is the Hippocratic oath. If it is like that with physical health, it should also be with financial health because it is what gives you certainty about the future. And this has not yet entered the country's culture. I repeat: quality we have a little more than before, because advisors are asked to be qualified, to do 30 hours of continuous training each year – something that is not required of almost any profession –. And more autonomy and more adherence to fiduciary duties. That is, simply, to be subject to an ethical code that gives primacy to clients. And this is very important.

And if there is independent financial advice, the advice is given by the bank...

— Or the brother-in-law. (Smiles).

The CNMV now says it analyzes content on social networks, those they call finfluencers.

— There are many. I'm sure there are trustworthy ones, but I know few. I see brutal atrocities.

And it even impersonates famous people...

— Yes. And, in general, they make recommendations. This is very dangerous. Because these gentlemen no longer meet the minimum. They are neither qualified, nor do they have to requalify each year, nor does anyone control them for selling junk. This is a drama, indeed.

Another point of attention perhaps should be cryptoassets like bitcoin, shouldn't it?

— Here perhaps there has been something that I do not find good at all, and that is that regulated and registered entities have perhaps entered too easily. They will tell you that it is an offer for a very small part of the portfolio, but you have to be alert because they are laundering an asset that, whether you like it or not, has no backing behind it to justify it.

And what do we have to do for it to be reversed?

— Incentivize investment in Europe.

Looking at last year's data, the weight of individuals in the stock market has decreased...

— True. The weight of everything has been inverted, but more so that of individuals. In Europe we have different markets, 27 different stock exchanges that are not integrated or poorly integrated. And above all, smaller companies.

Do we have an alternative in Europe?

— Not much, because companies are smaller compared to those in the United States. And in Europe, we either invest in productivity, innovation, and market integration and national champions in different sectors, or we will continue with a significant decline in relation to more dynamic parts of the world. We need to generate resources and they cannot be public. We need private money to invest. And more alternative financing, especially for SMEs, which depend heavily on banks.

So, what should we do?

— Incentivize through taxes. Here in Spain, the option has been to promote savings-investment accounts. It says nothing about taxes, but it does state that it will be for a maximum of 3,000 or 5,000 euros to avoid favoring the rich, when they are the ones who generate volume to be able to invest. A public consultation has been held, and two things have been mixed up: what is said in the European label and savings and investment accounts. A new differentiated vehicle is needed if investing in the stock market in general, in European stock markets, or in the Spanish market. It can even be requested that to have tax advantages, they remain for 3, 4, or 5 years and, therefore, that these gains are treated differently because otherwise, people who save pay for income and once they invest, in addition, all capital gains: damn, by personal income tax. You lose due to inflation, you lose due to expenses...