Wealth management and private banking businesses are changing. We are moving from a universal model to increasingly specialized advice. Faced with the need to serve clients with considerable capital and seeking differentiation from traditional banking, it is worth asking what key characteristics and factors an investment advisor should have.
What is a financial advisor, and what are their activities?
The European Financial Planning and Advisory Association (EFPA) indicates that a financial advisor is a person with in-depth knowledge of finance, who can recognize which product or investment vehicle is suitable for their client’s needs.
It is worth distinguishing between the independent financial advisor, the commercial advisor of a bank, and the company advisor. In this piece, we refer to financial advice in investments and wealth management, not the figure who helps the entrepreneur with the economic situation of her company (maintaining cash flows, obtaining financing, etc.).
The commercial advisor is only in charge of establishing business relationships with clients, offering them products that suit their investment profile. Meanwhile, an independent investment advisor is a professional who guides his clients in financial matters, having the capacity to offer them a personalized plan to help them achieve their financial objectives.
The fundamental difference between the two is that the commercial advisor receives commissions for the products they manage to market. At the same time, the independent professional’s sources of income come entirely from the fees paid by their clients.
What characteristics should a financial advisor have?
The characteristics required for a financial advisor can be summarized as follows:
- Knowledge: First, they must have a financial and tax knowledge base. The more solid this base is, the more talent they will be able to develop when offering solutions to clients. In addition, they need to keep up to date as more and more innovative financial products and investment vehicles are emerging, and economic conditions are changing.
- Objectivity: as we have already mentioned, a financial advisor can only be considered independent when they do not have any link or particular interest in offering their clients any financial product. This characteristic confers objectivity when drawing up plans and maintaining professional ethics.
- Communication skills: at any time during the relationship with the client, the investment advisor must be able to solve doubts and explain his ideas and decisions. The client must be able to understand him easily.
- Quality customer service: although high net worth individuals tend to demand more attention, all customers have concerns because their assets are at stake and require availability.
- Professional certifications: An investment advisor with certain certifications conveys the guarantee of keeping his knowledge up to date and committing to a code of ethics that requires him to look after his client’s interests.
What factors are key for a financial advisor?
Beyond the quantitative aspects, one of the main reasons for abandoning the financial advisory service is dissatisfaction and lack of initiative on the part of the advisor. In this sense, offering personalized and quality service and maintaining a proactive attitude is essential.
The criteria for selecting an entity or a personal manager include several aspects:
- The track record: factors such as experience, specialization, the evolution of assets under management, number of clients under management, etc. For example, not all investment advisors are prepared for derivatives operations.
- The services offered: do you have sufficient infrastructure to understand the needs of each client and be able to offer them a tailor-made solution? This factor is fundamental since information technologies and many existing financial products make it possible to provide a tailor-made service for each client.
- Remuneration: of course, this is one of the most sensitive factors, but there should be more than just the main one.
- Specialization: there may be generic financial advisors, but the client increasingly demands specialization. For example, it is possible to find sectorial investment advice specialized in Real Estate.
- Security and trust are also the most critical factors. In short, the client expects peace of mind. But if the previous points have been fulfilled, a good part will come by itself. The rest depends on the excellent relationship created, and the private banking business is not established based on coldness.
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