When you are faced with the choice of a financial advisor, first of all, ask yourself what type of service you need. Recently, new forms of advice have been introduced, from independent to “limit,” informed on the meaning of these new services. With the financial advisor services the deals come perfect now
Independent Consultancy Vs. Limited Consultancy
Recently financial advisory services have found a specific subdivision, generating two sub-categories, independent consultants and “limited” consultants.
Independent financial advisor: Consultants must…
- Be able to provide advice on the full range of investment products. To be able to perform checkups on every kind of portfolio
- To make a fair and complete analysis of the relevant products available and to be able to advise the one that is suitable with respect to the specific needs of the customer, also in light of the circumstances
- Be free from any kind of influence that could push them to recommend one product over another.
The financial products promoted by independent consultants can be investments in the stock market where the capital is not guaranteed, funds, SICAVs, pension funds, life policies.
If you are looking for a general check-up of your wallet, the independent consultant is the one who works for you.
“Limited” consultants: one who
- Recommends certain types of investments only and / or
- Recommends only products issued by a particular group of providers
- That can focus only on a certain type of product (e.g., pensions)
- Who can only offer a limited category of products from a limited number of providers
Independent or limited, what is better?
Regardless of the category of reference, it is necessary that financial advisors are registered and have obtained all the authorizations; therefore they must be in possession of the minimum requirements and have signed a code of ethics which they must always keep up to date. It is also expected that they will have a continuous update on the financial market situation.
For their advice, they must ensure that the potential customer’s propensity for risk is framed; this is done by completing a questionnaire. The quality of the consultancy, therefore, inextricably from these requirements, is in itself linked to every single company. The difference lies in the fact that, obviously, in a case, the range of products offered is restricted, so in reality, once the customer’s needs have been analyzed, it will not necessarily be possible to opt for the most suitable instrument.
Whichever way you decide to go, remember that you can always refuse to follow the advice in full if you feel they are not suitable, and look for another direction.
Compare consulting costs
In the past consultants did not charge any kind of costs, rather they earned from the commission on product performance. This commission was discounted from the client’s initial investment.
Recently, performance fees are no longer too common, but all consultants tend to determine an initial cost for the service (which may have fixed and variable components). It is necessary that the information about the service pricing be communicated to the customer in advance and it should always be possible that the customer decides, at his discretion, whether to pay in a single installment or installment payment. All this makes the service and its costs much clearer.