A financial consultant or financial advisor is an independent professional that offers financial advice to customers according to their individual financial circumstances. In most countries, financial advisers must obtain certain legal status and undergo certain training in order to give advice to people who need it. Some people are more financially knowledgeable than others. There are also people who prefer to deal with the issues themselves rather than engaging the services of an adviser. Regardless of your personal preferences, there are certain aspects of financial advice that you should consider when deciding whom to get a recommendation from.
The first thing that you should know is what financial advisors actually do. Typically, they will be hired by a bank or other institution to manage investments for them. This means that they are registered as representatives of that institution and receive a percentage of the total profits from the investments of their clients. Financial advisors can also be brokers or sale agents who work directly with clients to help them purchase or sell certain securities such as bonds, shares or mutual funds.
Although most financial advisors will tell you that they only advise their clients on certain investment options, this is not necessarily true. Just like a stock broker, an advisor can recommend an array of products ranging from stock indexes to pension plans and various forms of bonds. The types of products that they are allowed to recommend are dictated by the particular laws in which they operate.
The next thing that you need to know about financial advisors is what their specific areas of expertise are. All good financial advisors should be well versed in tax law, investment management, estate planning and retirement planning, as well as many other important subjects. Many people find that having a single specialist who is focused on one particular area of their finances is beneficial because it allows them to receive only advice that is relevant to their particular goals. For example, a married couple may find themselves with very different goals when it comes to saving money for their children’s college education.
One thing that financial advisors should never do is recommend a client for a financial product or service that is not suitable for his or her situation. For example, if a client is interested in obtaining insurance for their children from the age of five until the age of twenty four, they should make sure that the policy meets their needs. An insurance policy that is too expensive for their budget at twenty four could cost them hundreds of thousands of dollars over the course of their lives, whereas a policy that does not suit their needs at five might allow them to obtain cheap life insurance that suits their needs much better at twenty four. In addition, a financial advisor should not recommend a commission based investment product to a client if the product is not suitable for their goals and circumstances.
In short, a good rule of thumb is that financial advisors should not recommend a particular investment product or service to a client unless they meet or exceed the fiduciary standard. They should also not recommend a particular provider unless they meet or exceed the suitability standard. If a potential advisor does not meet either standard, he or she should explain their reasoning and whether or not they would recommend the product or service to their clients in the future. Finally, financial advisors who do not meet the suitability or fiduciary standard should not be allowed to practice law or offer legal advice under any circumstances. Any such recommended investments should be clearly identified as being a paid endorsement and all statements regarding the recommendations should be viewed as such.