ITALY - The demand for independent advice is on the increase amongst Italy's newly established occupational pension funds which offer their members investment choice.
Italy’s so called ‘contractual pension funds’ established after 1998 are still in the nascent stages of development, but as they grow in size, it is expected that the vast majority will offer investment choice.
At present, Fondchim, Fondodentisti and Fondenergia are the only three funds to operate the so called ‘multicomparto’ schemes which typically offer members one of three portfolios, from a very conservative strategy heavily invested in cash to active equity funds for those members able to assume a higher level of risk.
MEFOP, the Italian organisation dedicated to the development of the pension fund market, has proposed that the first step in assisting members with their investment decision could be a questionnaire, which assesses an individual’s risk appetite through a points system.
Although still under discussion, it is thought that the questionnaire will not only ask questions about income, assets and number of working years, but also subjective questions on how tolerant the individual would be of losses over the near and long term. Points would be awarded for each question, the tally determining the most appropriate investment option.
In conjunction with the questionnaire, MEFOP favours the election of independent members to each pension fund to perform an advisory function.
“It’s obviously impossible to transform the board of directors into consultants,” said Marcello Messori, MEFOP president.
“But my idea is that it would be better to have independent members on the board, instead of external advisors.”
By law, an Italian board of directors must be comprised of an equal number of trade union- and employer organisation-appointed members.
The process of appointing independent members to perform the advisory function will not be easily determined and will undoubtedly rouse an interesting debate.
Asked how any conflict of interest might be avoided, Messori responded: “Well, that’s the problem.”
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