What is a financial advisor?

Financial advisor is the job title for a service provider customers about investments, loans and insurance advice. This advice is either ad hoc basis or as part of a structured financial planning. At the end of the consultation can often the mediation of one or more financial products are available.

Synonymous terms include investment advisors and financial planners.

Financial advisors work independently or as an employee. Self-employed financial advisers are often contractually bound to providers of financial products, such as banks or insurance companies, or financial sales.

The name and registration

The term financial advisor, in contrast to that of the insurance consultant, not protected by law. As far as legal or tax advice regarding the impact, the financial advisor the limits of legal advice law and tax advisory law must be observed. However, the legal or tax advice to a limited extent is permitted if it is directly related to the activity. The type of admission depends on the product groups, in which he advises or taught. The basis for the self-employed the business registration.

Financial advice on loans

The arranging loans in Germany is subject to a special business license. You will be granted if you can prove that you have the required reliability and lives in parent assets, convicted of a relevant offense thus in particular not in the past five years, was still insolvency proceedings were opened over the assets. The self-employed must comply with the lists of rules of the broker and building regulation.

Financial advice on insurance

A special commercial license is for admission as an insurance broker also necessary. You will be granted if

  •      the required reliability is,
  •      parent‘s financial circumstances are present,
  •      sufficient professional liability insurance has been completed and
  •      the necessary expertise through a stored in the Commerce and Industry Chamber proficiency examination (name: Certified Insurance Specialist CCI) was detected or other qualifying statements.

Insurance intermediaries, which are linked exclusively to an insurance company and to assume liability for and the insurer shall not require such permission and have the expertise not be separately detected. The insurance agents shall be registered in a special register of Industry and Commerce.

Financial advice on investment products

In order to advise on investment products or give them to, one needs in principle approval as a credit institution or financial services institution under the Banking Act. For certain, essential for retail products, but there are exceptions. These include in particular investment funds and investments in closed-end funds. To convey this, a business license under the same conditions is far enough as for loan broker. You can find more must-read financial advice websites here, along with some inspiring financial advising quotes.

In addition to the loan broker must make its activities annually audited by an accountant or a chartered accountant and submit the audit report to the competent commercial authority of the permit holder. The Act to amend the financial investment intermediaries and investment law, the activity and permission with effect from 1 January 2013, new regulations and a permit requirement (§ 34f Industrial Code) was introduced. The federal government hopes to strengthen consumer protection in the amendment. Similar to the insurance agency, the expertise and professional liability insurance must be demonstrated in the future. The details are set out in the financial investment brokerage Regulation (FinVermV). The advice to clients for a fee (fee-based advice) should be regulated separately.

Since the Occupation Financial Advisor is not protected and the range of products and services, in which advice is relatively wide, the consultants working in different organizational forms and business models on the market. One can distinguish the following criteria, among others.

Compensation model

Often, the financial advisor or his company is paid after mediation success by the product provider (see also financial advisor rates and how much financial advisors earn in South Africa). Alternatively, the compensation is possible by the counseled in the form of a fee or mixed forms of both forms of compensation. The remuneration by the product provider is criticized because the risk that the entrepreneurial interest in the compensation could outweigh the customer’s interest.

Contractual obligations of financial product providers

Essentially, one can distinguish the contractual obligations and then whether there are contractual arrangements with how many product providers and has the obligations of financial advisors from these contracts. It is possible that an entrepreneur depending on the product group has different types of contract bonds. So he may be working for insurance companies as brokers for investment but as a multiple representatives.

Simply tied agent (exclusive agents)

The consultant is bound as a commercial agent to an exclusive product providers. He is from the Treaty obliges the interests of the merchant to maintain.

Multi-tied agent (multi-agent, multi-tied agent)

The consultant is connected as a sales representative with multiple product providers by contract. The safeguarding the interests of product providers also part of his contractual obligations.

Broker agreement

The broker is bound with the customer by a brokerage agreement; he has to represent its interests. With the product provider he has a contractual agreement to pay if mediation is concluded (reversing).

No contractual commitments to product providers

In particular, if the financial advisor for a fee acts, no contractual bond with the product provider is necessary.

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