I think that almost everyone has ever crossed our minds that if we are doing the best with our money, is it a better time to rent or to buy? Have we gotten the mortgage right? Are we investing our money well? Could it be done better?
Nobody has a crystal ball, but having an expert is key to making these types of decisions, especially when we are talking about such important issues as savings from a lifetime of work or incurring long-term debt for the purchase of a home. In general, a financial advisor can help us with financial planning (for example, preparing for our retirement), investment decisions (what to do with our savings or an inheritance) and financing (borrowing money).
We can classify financial advisers in a number of ways, but one of the most common ways to do this is as independent or non-independent. The main difference is if their interests are subject to any entity or they are free to make free recommendations, thinking only of the client's interests. A non-independent financial advisor has a significant conflict of interest and it is very likely that they will offer us products from the same entity in which they work or others with which they have agreements, since their way of obtaining income is through the sale of these products, it is the same case that if we ask the fishmonger where to buy good fish, the most normal thing is that he tells us that in his own fishmonger. In the other case, an independent financial advisor does not have interests aligned with other entities, only with the client and therefore will always make the decision that he considers most successful.
At this point, it is normal that we are wondering how we can know if the advisor we have contacted is independent. Well, according to the current regulation, it must indicate it. The advisor must itemize all sources of income from him and all commissions that the client pays.
As in many other sectors, technology is having a great disruption in the investment world, here we see the arrival of robo-advisors, which, as the name suggests, consists of moving from a traditional advisor to the digital and automated field through mathematical algorithms, thanks to this we eliminate the emotional and personal bias of the advisor. It has advantages and disadvantages, the main positive point is that these managers usually get a cheaper commission structure than a traditional manager, in the long term it can make a crucial difference in the profitability obtained. In addition, with the information we have provided, they offer us an investment portfolio model adapted to us. Regarding the negative points, we have that it is not a totally personalized service, depending on the case, they usually have several options and among them they will give us the one that best suits us, but not one created to measure for us. Nor will we have a person to talk to, who in something as important as the savings of our life, depending on the personality of each one and the degree of knowledge is very important. It is very easy when we are winning and we see how our savings do not stop rising while we are on the couch, almost by magic, but it is difficult not to panic in difficult moments, when we see that we have been losing for a while and that the trend does not change, or in moments of sudden market falls in which we have lost a large part of what we invested in a few days or months. At this time, having someone to talk to, who explains what is happening and why, how to adapt the strategy to these circumstances, in short, to help us stay on the right track. There are also hybrid versions that try to combine the best of both worlds.
Another fundamental difference is in access to advisers. Although the advisors can charge in various ways, in the end it must be an amount according to the amount invested by the client. It is not sensible for a customer with a € 10,000 account to be charged the same as one with € 5,000,000. Because of this, the larger estates have practically all the options they want available, while the smaller ones have a more limited supply. In this case, the robo advisor usually requires a smaller minimum capital, being a less personalized service and also with less costs for the company that offers it, being many times the best option for smaller investors.
Due to various problems in the sector and fraud, a minimum level of qualification and knowledge is required to perform financial advisory services, with a number of certifications. In Spain, the list of titles or certifications approved by the CNMV can be seen publicly at the following link: http://cnmv.es/Docportal/Legislacion/Titulos/ListadoTitulos.pdf
At Leindu we want to offer you the widest range of professionals possible, and how it could be otherwise, in the field of financial advice as well. We want you to find the professional that best suits you and that thanks to his help you can improve your finances.