Understanding the investor-advisor relationship in Belgium's retail and private banking sectors

Abstract

This research investigates the evolving relationship between financial advisors and investors in Belgium’s banking sector. It focuses on different aspects like regulatory changes, client expectations, investment product offering and industry transformation to understand the reality of advisory services in Belgium. Using a qualitative approach, the study draws on semi-structured interviews with experienced banking professionals. The analysis reveals that while new regulations such as MiFID and anti money laundering rules are seen as essential for client protection, they also increase administrative burdens and lead to more standardised advice, raising concerns about the loss of portfolio personalisation. Advisors emphasised that client trust is central to their work and often takes precedence over investment returns. Belgian clients, who tend to be older, are generally perceived as reliant on professional judgment due to limited financial literacy. All participants highlighted the need to improve financial education in the country. Simultaneously, clear distrust among younger generations towards traditional banking institutions is evident. Some of them prefer online financial solutions that offer quick returns and access to emerging asset classes. Discussions around structured products and compensation schemes revealed that performance based incentives have become less prominent, partly due to increased regulatory scrutiny to cleanse the sector of past faults. However, several grey areas remain regarding how certain products are promoted and the nature of year-end bonuses, making it difficult to fully assess the alignment of interests between banks, advisors, and clients. Digitalisation and AI are also transforming the investor-advisor relationship. While opinions differ on whether it is threatening or not, all agree they will continue to impact the profession. Overall, this thesis offers insights into how banking professionals work in a complex environment marked by regulatory pressure, evolving client expectations, increasing standardisation, and the enduring need for human connection in financial advice.