Chief Executive Officer and General Manager, Banca Generali
Class CNBC - Gian Maria Mossa
Gian Maria Mossa, AD di Banca Generali, intervistato dal Direttore di Class CNBC Andrea Cabrini nella trasmissione “Partita Doppia”. Stime di crescita della Banca riviste al rialzo, ricetta per affrontare in pole position la sfida normativa della MIFID II, strategie e opportunità di mercato tra gli argomenti trattati.
About Gian Mossa
Gian Maria Mossa, CEO and General Manager of Banca Generali, has commented on the bank's financial performance and broader economic trends. In May 2021, he described the first quarter as "one of the best quarters ever," citing record net profit, revenues, and total assets. He attributed much of the quarter's inflows to existing advisors who have embraced the bank's strategy and to the recruitment of new professionals, noting that total assets had grown to over 77 billion euros. Mossa also highlighted the bank's focus on sustainability, stating that "more and more the interest and the result of a company will be used not only for the bottom line but also for the ability to create value for all stakeholders." During the COVID-19 pandemic, Mossa discussed the crisis's impact on investors and the economy. In an April 2020 interview, he stated that the crisis was unique because market declines were not driven by retail investor panic, as "people are worried about not dying, not about what is happening to their investments." He expressed concern that Italian portfolios were "loading up on risk in a not too conscious way" due to the search for yield in a low-interest-rate environment. Mossa has also spoken about regulatory changes, describing the MiFID II directive as an opportunity for transparency but expressing concern about its timing, as markets "have already done a lot" and investors might face higher disclosed costs during a less supportive market phase. He has characterized fintech as "not a problem but a great opportunity," particularly for improving operational efficiency and client platforms.
Transcript (47 segments)
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Interviewer0:01
Welcome back to Partita Doppia, our series of meetings with business leaders. We are with Gian Mossa, CEO of Banca Generali. Welcome, Mossa. Good morning. So let's talk naturally about savings, the asset management industry, but also about the savings of Italian families who follow us. It was a positive half-year overall. The asset management industry collected almost 50 billion, exceeded an important psychological threshold of 2,000 billion in assets under management by the fund system, and this with markets that did not do much but were substantially positive, fairly stable without major shocks. But we are already looking at what will happen next year, a major novelty: the MiFID 2 directive. We have talked about it on several occasions. It is fundamentally a European response to the need to provide greater protection to savers from various points of view, from the relationship with advisors who propose investment solutions to costs and so on. There will be important innovations, and we are trying to understand with you in the asset management industry how you are preparing. In London at your Investor Day, you focused precisely on this topic of MiFID 2. First of all, why?
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Gian Mossa1:10
Well, first of all to clarify. There is still a lot of confusion out there. I think it is very important to give our interpretation and the opportunities that will be created thanks to MiFID for the industry of financial promotion and financial advisors in general, and then for Banca Generali, because I believe we have moved in time to be best prepared to respond.
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Interviewer1:40
Let's talk from the industry's point of view: opportunities or risks? More opportunities or more risks from MiFID 2 for those who do your job?
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Gian Mossa1:45
Certainly opportunities. Let's say that MiFID has three objectives: to increase quality for clients, to increase the level of protection and transparency. In one word, it means advisory. The need to find a capable professional to accompany them in the long term for informed choices. So certainly an opportunity.
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Interviewer2:06
And for you, what will change compared to today?
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Gian Mossa2:08
For us, it will change substantially little from an effective point of view, because we are already well equipped. We make our professionalism, the professionalism of our private bankers, the point of reference. That means that once we understand the clients' needs, we give access to all the opportunities offered by the market. So from a substantial point of view, little changes. From a more formal point of view, we will have to set up procedures and processes to be more stringent, more compliant with the new dictates. Substantially, we will have to be more rigorous in product selection processes and more transparent in client information.
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Interviewer2:52
For clients, what will change for savers and families?
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Gian Mossa2:55
Well, let's say it depends on which client we are referring to. The objective is protection. Protection and safeguards are born for relatively defenseless investors, so small savers. Small savers must expect and demand greater respect, greater transparency, and greater service. It is clear that we are fueled by commissions. Commissions are in exchange for a service. This service must be explained, quantified, and communicated to the client. So the awareness of making the client understand why they are paying, for which service, and with what levels of protection. This will be one of the main elements of novelty, because MiFID 2 will bring out the cost of asset management. And some in the industry are worried that this will cause a shock for savers who have struggled so far, there was a certain opacity in the communication of this data.
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Interviewer3:57
Do you think that in the relationship with the client, this changes profoundly? Could there be a reaction that will push some towards the desire to do it themselves, as has sometimes happened in the past, using technology to go to sites that offer advice directly with algorithms, or not?
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Gian Mossa4:13
But I don't believe much in the direct client-technology relationship. I rather believe that there will be the right price for the right level of advice and the right level of efficiency of the proposed products. In our specific case, we have already moved away from the concept of wraps, containers, product platforms that are very efficient both from a tax and operational point of view, through which you can truly access market innovation. It means it costs less to invest with these containers. It is certainly more efficient if we think about opportunity cost. The total cost for the client is in line with more traditional solutions, but the benefit in terms of risk-return, taxation, and execution, i.e., operability, is certainly more effective. Plus, there is the possibility of having an overall risk monitoring, which in a context where today the word risk seems a bit forgotten by everyone becomes even more fundamental and relevant. To be ready, if there is a concern, I am very worried about MiFID, which in some ways is a confirmation of the right and sound principles of MiFID introduced in 2006. I am very worried about the timing of its arrival, because it arrives at a time when markets have probably already done a lot, and so there is the risk that on one hand savers will see the costs of management highlighted, on the other hand markets may not be as supportive as they have been in recent years.
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Interviewer5:39
Is that what you are referring to?
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Gian Mossa5:39
Exactly, exactly. We have had years of great rally in both the bond and equity markets, very positive correlations. There is no asset class that in a 3-4 year horizon has performed poorly. Volatility is at historical lows, and it is perceived that every time something happens that cannot be explained, it is a paradigm shift. I don't believe in paradigm shifts in financial markets. I believe that this great abundance of liquidity has somewhat distorted risk measures. With a return to normality in terms of liquidity, we will see market volatility again.
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Interviewer6:15
Listen, also for this reason you put at the center of your Investor Day, which was held in London, the theme of how you will change with MiFID 2. The market reacted positively to the news you announced. But let's talk about the pricing of the new models you intend to offer and use from next year. What will change compared to today?
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Gian Mossa6:31
Well, we normally work, like the entire Italian industry, on a rebate logic. Part of the product commissions are passed back to distribution, i.e., to us for the activity carried out by our financial advisors. This remains confirmed and will continue with the entry into force of the MiFID review. Alongside these models, we have already introduced at the beginning of the year more advanced, more sophisticated models based on specific client needs. Let's give some concrete examples. Today, the problem for Italians is not so much financial assets, but non-financial assets: real estate assets, houses. We know that it is a very illiquid asset. There is a structural imbalance between supply and demand, costs are rising, and therefore an external opinion on how to optimize real estate assets is becoming an ever-growing need, as is the transfer of wealth between father and son, i.e., generational continuity. This requires qualified advice. Obviously, the greater the commitment required for this type of service, the more necessary it is to make explicit a fee so that the service being provided and the value of the service are clear. It is not only for non-financial assets or for the theme of generational transfer protection, but also for financial assets. We believe we can offer a service typically characterized and offered only by family offices, for a clientele that is also affluent and private, the possibility of putting together all the client's wealth and giving them an assessment of the risk and opportunities underlying the set of investment choices.
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Interviewer8:17
You have described quite sophisticated needs. Does that mean Banca Generali will increasingly be a private bank?
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Gian Mossa8:24
Well, we have the presumption to be able to offer high-level services to private clients, and in some way with some level of standardization, making accessibility to generate new income and concern to safeguard what has been accumulated so far. This is everyone's need. It is clear that the greater the wealth, the greater the demand for these services, and the more sophisticated the underlying complexities. The challenge is to provide this type of service certainly to high-net-worth clients, but also in some way to provide guides, guidelines, good practices, sorry, to stand alongside Italian families as well.
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Interviewer9:18
And how much will digital help you in this? How are you transforming the company from a technological point of view?
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Gian Mossa9:25
We believe extraordinarily in the digital revolution, as it is essentially a way to free up time for advice, to free up time for our financial advisor, and to enable the bank, the client, and the banker to have more orderly, normalized visions and to be more effective. So the first stream was to develop the entire platform for our financial advisors. We took, you learn nothing in the digital world, we in some way took the best international experiences. We took Amazon's experience to introduce the concept of e-commerce, digital signature to eliminate paper. We were inspired by Google, for example, to create a set of engines where to find all the information on markets for education and communication to our bankers. We launched the BG Store, Banca Generali Store, in the Apple logic where every app has its meaning and utility. That's what we did. We tried to think in a new, different digital world in the more traditional market of private banking.
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Interviewer10:38
Will there be more artificial intelligence and more relationship with apps, algorithms, and the web, or more direct and personal relationship with advisors in the future of Banca Generali?
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Gian Mossa10:48
I believe that Banca Generali is what it is today thanks to the quality and professionalism of our bankers. We are a company that in jargon is called B2B2C. We exist to the extent that we create value in the banker-client relationship. This is our fundamental asset, clearly shared at all levels of the company. I believe that enabling the client to make informed choices and the banker to have effective tools and services to best respond to the client's needs is the challenge for all those who do our job.
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Interviewer11:18
So, your bankers? Today we have reached 1900. You announced important objectives in terms of increasing assets under management by 2021 and of net inflows. What are these objectives?
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Gian Mossa11:28
We aim to exceed 70 billion in 2021, with net inflows between 3.5 and 4 billion per year. This year we are going much faster than expected. We closed the first half with 3.8 billion, so we raised estimates for this year to between 5 and 5.5 billion. One thing is certain: there is a growing need for a qualified professional alongside. The concept of trust has shifted from institutions to professionals, and that is where we are positioned. So interest in us is growing, and that explains the numbers.
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Interviewer12:06
But do you also have a hiring campaign planned? How many bankers will be needed to sustain these growth rates you described over 3 years?
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Gian Mossa12:13
Well, we never set numerical targets for recruitment and selection of these professionals. Let's say something is happening that we have always hoped for: the best professionals from traditional structures are asking us, contacting us to understand how it is possible to work in a more freelance environment with private services. So today more than ever there is curiosity to try to provide a high-value-added service but with an entrepreneurial hat. So there is growing interest. We do great selection. There is no numerical target, also because the current structure has the highest productivity in the market, so our current colleagues are enough to achieve excellent numbers. We are always open to welcoming new professionals.
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Interviewer13:03
Listen, since the beginning of the year, the system as a whole is doing well. Net inflows are positive, as we said at the beginning. You cited important numbers. I ask you: where does this additional inflow come from that you have had in recent months? What is the main growth driver?
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Gian Mossa13:17
Well, let's say on one hand there is, as we said, the growing curiosity, word of mouth, the increase in the percentage of the individual client's portfolio. That is the ordinary. The extraordinary comes from those value-added services we talked about earlier: the need, for example, to refinance a company, to optimize real estate assets. Those are, how to say, very round, very important hits. So being available alongside the advisor in choosing the best international players to provide a response to non-financial advisory, which is an ever stronger and more felt need. When there is an event that generates liquidity, that is an opportunity for growth of our assets. So this is the element of great novelty. One of the novelties since the beginning of the year is also the launch of the individual savings plans, the famous PIRs, which started at a much faster pace than the government itself expected. You are playing this game, will you play it? How do you see it?
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Interviewer14:17
You are playing this game, will you play it? How do you see it?
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Gian Mossa14:21
Well, I believe that PIRs are a commendable initiative that in the medium term will have great success. But success is not measured so much by the volumes it manages to achieve, but by how effectively it helps grow the real economy. Today we are faced with a limited investable universe and some limits on retail investment in the real economy. So today we believe in it relatively little because the solutions presented on the market so far are substantially very traditional balanced products, where a part is invested in small caps, a very thin market in Italy with valuations that have now reached and exceeded the European average, and the rest is typically the classic bond portfolio. So either small cap risk, valuation risk, or interest rate risk. So what we are doing, and we will probably launch it in the second half of the year, we are still verifying that these are viable solutions in the UCITS world, is to reduce bond risk by introducing alternative solutions like long/short, for example, and on the other hand reduce issuer risk and spread it with more diversified risk, which means substantially that we get money to the economy but diversify the specific risk concentrated on individual instruments. This is the challenge. The ultimate challenge, and I believe the government is working on it and we will also have to work a lot with the regulator, is to channel these inflows into the real economy, into the illiquid world to make it liquid. I'm talking about private debt, private equity, the way to get money to small and medium-sized enterprises to be alongside the Italian entrepreneurial fabric to revive an economy that suffers from the structural weakness of banks.
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Interviewer16:23
Will the push from PIRs be enough to also raise awareness among entrepreneurs to open up capital, go towards the stock exchange, manage generational transitions, perhaps together with a partner that is the stock market or an investment fund or other entities that are currently on the market?
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Gian Mossa16:36
Today capital is substantially all coming from abroad. So when one decides to finance a company, sell a company, or do this type of reasoning, typically unfortunately one looks abroad. I believe that the entrepreneur's will is to maintain Italianness, but it is also to do things as simply as possible. So a collective effort is needed from all institutions and those who do our job to facilitate and make this transition easy: from seeking capital abroad to opportunities for growth or transition in Italy.
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Interviewer17:15
Speaking of simplicity, Mossa, the launch of PIRs also seems useful to shift the center of gravity of Italian investors, who traditionally are more on bonds and especially in this phase still very much on liquidity, towards a medium-long term investment linked to the real economy. There is a theme of education of the Italian saver, who has always been distant and still considers assets like equities risky, even though in surveys they expect a return on investments ranging from 7% to 9% to 11%. We have seen in some research how much the education of Italian investors matters at this moment. What is changing from this point of view?
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Gian Mossa17:56
Well, I am a bit skeptical on this topic, in the sense that it is our responsibility to take risk levels and try in some way to tell the negative side. Indeed, we have made risk management and risk communication our point of reference to develop the entire strategy. That is, we must have the courage to talk about things that may not go in the desired direction. I believe that today the portfolios of Italians are loading up on risk in a not very conscious way. All the investment solutions that are present on the market today, let's say all the flexible multi-asset solutions, obviously but correctly also hide a greater risk assumption to try to perform positively. But they hide, perhaps it is not entirely correct or transparent, it depends on the distributor, on how the distributor makes this information usable. Let's give an example. I believe that if today a person has to take medium-long term risks and has a family need, the simplest thing to do is to take the full clear equity risk and then perhaps associate an insurance protection against a possible market fall in case there is a negative family event. That is a real advisory service: giving an indication of market volatility today and therefore saying that a portfolio has volatility of two or three, in my opinion, is not very fair. At least one should base it on historical volatilities to reduce negative surprises.
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Interviewer19:31
Are you worried that Italian investors at this moment are sitting on an excessive dose of risk, both compared to expectations of what could happen in the market and compared to the awareness of the risks they have taken?
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Gian Mossa19:40
Today, risk is being taken in forms different from those perceived as such. So the equity exposure has not grown much, even in our specific case we are between 20% and 25%. What is happening is that the component of interest rate risk, credit risk, and currency risk is increasing. In this sense, I am not so convinced that there is great awareness, and the financial advisor has precisely this role. We are working on this.
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Interviewer20:11
So what indications are you giving at this moment through your network?
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Gian Mossa20:14
Well, our concept is that markets have run a lot. So on the equity side, entering at these levels does not make much sense from our point of view. So if today we had to say whether to be long or short on an equity position, we are either neutral or starting to be short. We are taking home the benefits of this long rally. On the rates side, I would be very careful about the duration part because we are seeing movements, volatility on rates is increasing. I would start to be more positive at this moment on greater currency diversification, because the strong correction of the dollar and all major currencies has created, in my opinion, opportunities in the medium term.
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Interviewer20:59
So volatility has been low in these first 6 months. Do you expect, we have seen some signals in the bond market in recent weeks, that there could be a recovery, a rise, a somewhat nervous summer in the markets from this point of view?
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Gian Mossa21:11
Summer markets have accustomed us to surprises, not always too positive. If we look, we rely a lot on indicators with higher beta, for example the Nasdaq has become more nervous lately. Large caps a little less. There is a lot of sector rotation. But the performance of recent weeks has certainly not been positive. It could also be, how to say, an arrival point rather than a new accumulation point to then start new highs. So my advice is: let's go on vacation calmly, let's not take long positions today in a context where there are certainly conditions for increased volatility.
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Interviewer21:51
Many are worried, however, especially about the bond part of portfolios, with the expectation that central banks will actually start, after many words, to normalize their policies. Do you share this concern?
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Gian Mossa22:03
Well, yes, I believe that, for example in Italy, the variable rate part, if you take the country spread, staying on the variable rate part you can in some way get returns above zero. Going on the long part of the curve, taking on duration risk, in my opinion is very dangerous. Just look at the Bund, a very simple calculation example that I recommend to everyone: ask how many years it takes to recover with the coupon if rates increase by one percentage point. Today, the game is not worth the candle.
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Interviewer22:35
Listen, Mossa, in conclusion, in your world, the asset management industry, major maneuvers are underway. There is consolidation linked precisely to the arrival of MiFID 2, linked to the fact that size matters in this business on margins and so on. What role do you want to play at this moment in the Italian asset management world?
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Gian Mossa22:53
Well, we believe we have achieved a corporate organization and structure that is capable of growing also through external lines. This is an always valid theme that we have always repeated. We have demonstrated in history that we have successfully integrated realities even different from ours. It was the case of BSI Italia, the case of Gottardo, the case of Credit Suisse's financial promoter division. So between saying we want to buy or we want to be bought, let's say we prefer to look at opportunities. So if there are good opportunities, we are among those willing to consider them. MiFID certainly sees a potential loser, which is the concept of boutique, because governance and IT costs will tend to grow. My feeling is that in those relatively small realities, there could be a change of strategy and probably a search for an exit. In that case, we are willing to consider, but there is nothing on the table at the moment. And how to say, we have such strong organic growth that we don't need it. If an opportunity exists, why not seize it?
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Interviewer24:17
But the other large groups are strengthening further. Naturally, Generali with its over 400 billion as a group is in first place, then there is Eurizon, and then now Amundi. Regarding how this geography is changing, what do you expect? There is also another pole in formation, assuming that what we talk about every day will come to fruition, the one around Anima and Gesticlle and so on.
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Gian Mossa24:41
Well, I believe that if we look at the strategies, in the case of Generali I think the process started is the right one. There is a very capable manager and the strategy is very clear, so I am very confident that this will bring indirect benefits to us as well, because we could benefit from better skills in asset management. Aggregation, in my opinion, is necessary to add critical mass, because the pressure, first in Italy, will concern the factories rather than the distribution. It is clear that before I start to suffer margin pressure, I will exercise this pressure on product providers. So size will matter more and more. I believe there will be an acceleration in the coming months.
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Interviewer25:25
As you know well, sometimes the stock market, investors, when faced with a company that is preparing for acquisitions, get worried. You have a stock that is now near its all-time highs, which it touched, if I'm not mistaken, a year and a half ago, and we are around 28 euros in the area of 28 euros compared to 32. What message did you give in London to investors and the market, and what message are you giving today?
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Gian Mossa25:46
I believe we are perhaps the most sustainable reality on the private banking market today. We have a very healthy and sustainable business. So in the logic of multiples, in my opinion ours are still low. All the operations I told you about before are operations that we self-financed and did not impact the stock, because obviously we have some capital, and given our size, our operating leverage would work very, very well. An operation is done if it is accretive, i.e., it creates value for the shareholder. So I don't see risks from this point of view for our stock.
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Interviewer26:25
Well, thank you, good work, Gian Mossa, CEO of Banca Generali. Thank you for following Partita Doppia, the series of meetings with business leaders.