In 2022, the federal government introduced a mandatory risk assessment for investment advice. Most private investors consider this to be sensible. This was revealed by a study conducted by Lucerne University of Applied Sciences and Arts. On the other hand, the voluntary obligation to inquire about sustainability preferences, which came into force this year, is viewed more critically.
Since 2022, banks have been legally obliged to carry out risk profiling as part of investment advice for private investors. The financial circumstances, knowledge and experience with securities as well as the investment objectives must be clarified. The aim is to protect investors from bad investments due to inadequate financial knowledge.
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These legal requirements (FinSA) are considered sensible by private investors, as a study by Lucerne University of Applied Sciences and Arts (HSLU) shows. Three quarters of the bank clients surveyed are satisfied with their investment solution because it is tailored to their risk situation. For most customers, satisfaction with investment advice goes hand in hand with a high level of trust in their bank’s investment expertise. Investors appreciate the fact that the investment strategy is discussed in the course of a comprehensive and professional investment meeting. This enables the customer to decide on an investment solution on the basis of solid data. "As a result, the investor identifies with the chosen solution and stands behind their investment solution even in times of a difficult stock market environment," says Felix Buschor, one of the study authors and HSLU lecturer. It is therefore not surprising that most investment clients believe that the legal regulation of investment advice makes sense.
... Ambivalent sustainability targets
Sustainable investments are popular, as recently confirmed by the latest Sustainable Investments Study conducted by HSLU. This is also reflected in the interest of private investors: around half of those surveyed are interested in sustainable investments - women significantly more often than men. However, their own knowledge and experience is rated as rather modest. "Investors would therefore like their preferences for sustainable investing to be clarified during the investment advice process and incorporated into the investment objectives accordingly," says Buschor. Investors expect easy-to-understand, transparent information on sustainable securities when implementing their investment objectives. However, around half of the people surveyed are not entirely convinced of the competence of their bank advisor when it comes to sustainable investing. They rate the quality of advice on the subject of sustainability much lower than the banks’ general investment expertise.
When asked whether the topic of sustainability should be included in investment advice on a mandatory basis, the study results paint a rather ambivalent picture: one fifth are critical of such an obligation. This means that skepticism towards sustainability requirements is twice as high as skepticism towards requirements for risk clarification.
Sustainability requirements perceived as paternalism
According to Buschor, there are three main arguments put forward by critics: firstly, sustainable investing should be regulated by the market. All investments, including sustainable investments, must prove themselves in the long term through the positive development of the chosen investment. Corrective intervention by the regulator is not necessary. Secondly, people want to be able to mix sustainable and conventional investments in their investment portfolio and not be restricted to one-sided solutions by restrictions. Thirdly, private investors who are critical of regulation also see themselves as having a duty when it comes to sustainability. Mandatory requirements should not lead to them being patronized by banks - or the regulator. However, the authors of the study emphasize that it is still too early to draw any final conclusions. Overall, opinions are still being formed as to whether and how investment advice should be supplemented with sustainability obligations. "It will be interesting to see what experiences banks and their clients will have with the self-regulation requirements on the inclusion of sustainability in investment advice, which have been partially implemented since the beginning of 2024," says Buschor.
