The job title “financial advisor” is not protected as there is no special training for it. However, not everyone can simply give financial advice. Today, comprehensive proof of knowledge is required in order to practice the profession. However, financial advice is divided into numerous categories.
- The term financial advisor is not legally protected.
- For a number of years, training or expert examinations have been necessary for the exercise of the activity.
- In addition to commission-based advice, fee-based advice is becoming more and more established.
- As an alternative to human advisors, digital robo-advisors offer automated asset management.
What is a financial advisor?
Short for FA by abbreviationfinder, a financial advisor provides consumers with information on specific financial topics. If he works on a commission basis, his goal is to sell a certain product in the end. A comprehensive as-is analysis of the customer’s economic situation should be part of the consultation. The Securities Trading Act has provided for such analysis and logging for many years. The one-company representative can only use the products of his company when preparing an offer, while a broker or multiple representative can offer a larger selection of solutions.
From a legal point of view, both the one-company representative and the multiple agent must represent the interests of the financial product provider in case of doubt. The broker, on the other hand, is only obliged to the customer according to the “best advice” principle.
Digital asset management via robo-advisors offers an automated alternative to traditional financial advice. The robo-advisor determines the risk profile of the investor, creates a corresponding portfolio for him, controls the performance and adjusts the composition if necessary. In the Robo-Advisor comparison, consumers can see which Robo-Advisor are currently available and what costs they cause.
What types of financial advisors are there?
In addition to the tied one-company brokers in accordance with Section 84 of the Commercial Code (HGB), there are also independent financial advisors (brokers), regulated in Section 93 HGB. According to the working method and the subject of the consultation, the market differentiates between:
- Investment advisor
- Fee-based investment advisor
- Financial investment broker
- Fee-based financial investment advisor
- Insurance intermediary
- Insurance agent
- Insurance broker
- Insurance advisor
- Pension Advisor
- Real estate loan broker
Approval is required for all of these professions. In the insurance area, for example, a corresponding IHK examination must be taken if the consultant cannot prove any professional training.
As an alternative to the commission regulation, more and more freelance financial advisors work on a fee basis in accordance with Paragraph 34h GewO. However, it is forbidden to withhold a commission payment from the company concerned when advising on a fee, in order to ensure the absolute neutrality of the consultant. A mixed form is only permitted if the financial advisor is not explicitly acting as a fee advisor.
What training does a financial advisor need?
Since there are a wide variety of financial advisors, there is also no uniform professional training. The following apprenticeships are possible:
- Bank clerk
- Businessman insurance and finance
- Insurance salesman
In addition, the following training courses lead to advisory professions:
- Banking specialist
- Specialist for financial advice
- Specialist advisor for financial services
- Specialist for insurance and finance
- Insurance specialist
A proficiency test leads to these professional qualifications:
- Financial investment specialist
- Insurance specialist
Depending on the qualification, different consultations may be carried out. The banker is allowed to advise on capital investments, but not on insurance. The insurance salesman, in turn, is allowed to advise in the field of insurance, but neither in the area of loans nor capital investments.
The alternative, unprotected, job titles for a financial advisor are:
- Financial advisor
- Financial advisor
- Financial planner
- Finance broker
These professional titles can be used by anyone and therefore do not say anything about the professional qualification.
Due to the legal requirement for training or proficiency testing, the times in which structural sales such as AWD or DVAG could send unskilled employees who only had the most essential basic knowledge are a thing of the past.
While investment products, with the exception of shares , were allowed to be brokered with the permission according to Paragraph 34c GewO until 2013, the legislature introduced a stricter permit requirement in 2013 in the interests of consumer protection.
For financial investment brokers and financial fee advisors, they must have themselves audited annually on the basis of Section 24 Financial Investment Brokers and Asset Investment Law and submit the audit report to the competent supervisory authority.
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What does an investment advisor cost?
The cost of financial advice depends on the way the financial advisor works. In the case of remuneration based exclusively on commission, there are no costs for the customer. The commission for the advisor is factored into the insurance premium or the costs for the investment institution or the lending bank.
If the financial advisor demands a fee from the customer in addition to the commission from the product provider, for example for a target / actual analysis of the finances, this must be freely negotiated.
In order to get an idea of a possible fee, it is worth looking at the fees of the consumer advice centers. In Bavaria they charge 60 euros per hour, in Baden-Württemberg 70 euros and in North Rhine-Westphalia 100 euros. With a private financial advisor, the bandwidth ranges from 100 euros to 250 euros per hour, depending on the complexity of the topic. Some financial advisors do not charge a fee for the initial consultation.
The fee is also due if the customer decides not to purchase the product on which the advice is based.
How do you recognize a good financial advisor?
Sales psychology says that the first three seconds of getting to know each other decide whether there is sympathy or antipathy between the customer and the financial advisor. If they both like each other, the customer will say they have a good financial advisor. However, there are also objective criteria.
The statement that only a fee advisor can provide really good advice is only partially tenable. A one-company representative can definitely put the commission aside and advise his customers fairly, even if there is no business deal.
If it is a question of financial advice in the world away from the Internet, several points provide information about whether the customer is dealing with a good financial advisor or with a commission shark.
- The consultant listens and does not get lost in endless litanies about the benefits of his product.
- The consultant does not ignore open questions because the answer could endanger the conclusion, but explains all points in an understandable way, not in technical jargon.
- At the beginning, the financial advisor records all the relevant financial data and also gets a general picture of his customer so that psychological factors can also be taken into account when choosing a product.
- A good financial advisor relies on facts when introducing a product to guide the customer to the end.
- Finally, a good financial advisor will not put pressure on the customer, but will give them time to think about it.
Financial advice online
In the world of the internet, financial advice has changed dramatically. Gone are the days when customers sat endlessly on the sofa with an agent. Comparison portals enable autonomous selection, especially for products that do not require much explanation, such as overnight money or loans.
The comparison portals already play the role of financial advisor, as they offer the customer not only the products but also comprehensive information on the respective topic. Ideally, a comparison portal offers the best of both worlds: the comparison, the information and the option that the customer can ask further questions or obtain information over the phone.
When is an investment advisor worthwhile?
Consumers should refrain from consulting an investment advisor when opening a call money account . However, there are lines of business in the insurance sector that require advice. These include private full health insurance and disability insurance. These topics are so complex and full of pitfalls that a layperson can quickly make the wrong decision just because it is cheaper.
Financial advisors are also worthwhile when it comes to financing a property , regardless of whether you use it yourself or rent it out. The same also applies if an investor has previously only hoarded his money on the savings account and now wants to invest in securities.