What makes a great investment advisor?
Money advice - How do I find a reputable financial advisor?
Not all of them have the necessary knowledge to independently invest their own assets in the financial markets. Often there is simply not enough time to get detailed information about the individual stocks and bonds, let alone about all the many structured products on the market. And the majority of people also want to plan their own finances over the next few decades.
Instead, advice from the house bank or an independent financial advisor is often followed. But blind trust can be dangerous: even financial advisors cannot predict price developments and are sometimes wrong with their advice.
It is even worse if the advisor deliberately persuades the customer to use unsuitable products. This is made possible by a conflict of interest: bank advisors are paid to sell their own bank's products - which does not necessarily have to be the optimal solution for the customer. Independent financial advisors also receive different commissions depending on the product - and so do not always act in the interests of their clients.
But of course not all financial advisors are cutthroat who are only interested in their own gain. Many do serious work and take their job seriously. But how do you recognize this? Points that make a good financial advisor:
1) He has a recognized educational qualification
Anyone can call themselves investment or financial advisor, the job titles are not protected. It is therefore all the more important to inquire about the consultant's training. "The educational qualification should be recognized by the state, either by the federal government as the education authority or by Finma," says Felix Horlacher, head of the IfFP Institute for Financial Planning in Zurich, about cash. The Horlacher Institute offers various courses and advanced training in the field of financial planning.
Officially recognized educational qualifications are, for example, "Dipl. Finanzberater IAF", "Finanzplaner mit Bundesfachausweis" or "MAS Financial Consultant" (see also box below).
2) He has proven (practical) experience
The best training is of no use if the consultant has not yet proven himself in practice. Especially in more complex financial situations, it is worthwhile not to bring in an experienced financial expert, rather than a greenhorn. How long has he been in the job and what has he achieved so far? Such questions are allowed, even compulsory. He may be able to prove previous successes by means of references. Often it is also worth asking around among friends or acquaintances - they may be able to recommend a suitable person with sufficient experience.
3) He is interested in the personal situation
"Financial advisors should listen to their customers and not offer an '08-15 solution'. Everyone is individual, so financial advice must also be individual," says Mario Huber, President of the Swiss Association of Financial Advisors (SFBV). The SFBV is an association of independent Swiss financial advisors.
The counselor must take into account information about the financial, professional and family situation. At the same time, he should understand the customer's wishes and plans for the future. He asks a lot of questions in order to define the priorities with regard to security, flexibility, return and duration. This results in a personally tailored portfolio. Since the life situation can change again and again, the good advisor continues to look after the customer on a regular basis even after the initial consultation.
4) He discloses his compensation
According to Horlacher from the Institute for Financial Planning, there is no standard for consultant remuneration. But of course nothing is free in the financial sector. When financial advice is touted as free, the costs are hidden in the products in the form of commissions. These can vary from product to product. For example, ETFs - passive, index-based products - hardly earn the advisor any commission. And are therefore rarely or never recommended. The most transparent are consultants who work on a fee basis (i.e. hourly wages) or who receive a flat rate agreed in advance.
Hidden commissions are also possible with a fee payment, and not only for bank advisors: "The 'independent' label is highly unreliable, as independent advisors can also be controlled by commission interests," warns Horlacher. It is therefore important that all compensation is transparent. Ask the advisor to disclose any commissions or other hidden remuneration in writing.
5) It indicates product risks and costs
If the advisor speaks of dream returns that are possible with a certain product at a comparatively low risk, then the alarm bells should ring. Because the higher the expected return, the higher the risk. A good advisor explains the products offered in detail and explicitly points out the risks and costs to the customer. Financial products that are not understood even after detailed advice should be avoided at all costs.
6) He's not pushy
Financial advice combined with the subsequent decision-making takes time. It is dubious if the customer is put under time pressure and urged to buy products. Before concluding the contract, the desired reflection period should be granted, during which second opinions can be obtained unabashedly. But be careful: If the consultant is paid according to time, even a very leisurely pace with long "pauses for thought" is extremely suspicious.
7) He hands out a consultation protocol
The most important results of the interview should be recorded in writing and signed by the financial advisor. This is for security and can be used as evidence in the event of a dispute. "From our point of view, it is dubious not to use any consultation protocols," says Huber from the SFBV. Protocols would serve to protect both the customer and the financial advisor.
Recognized educational qualifications for financial advisors and planners:
- Graduate financial advisor IAF (information and sponsorship: www.iaf.ch)
- Financial planner with federal Certificate (www.iaf.ch)
- Graduate financial planning expert NDS HF (www.sib.ch)
- MAS Financial Consultant (www.zhaw.ch)
Financial advisory-related or related degrees
- Insurance broker VBV (www.vbv.ch)
- Insurance specialist with federal Certificate (www.vbv.ch)
- Insurance college (www.vbv.ch)
- Higher technical college for banking and insurance (www.hfbf.ch)
- Certified Wealth Management Advisor CWMA (www.saq.ch)
Source: Felix Horlacher, Head of the IfFP Institute for Financial Planning (www.iffp.ch)
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