What is the Financial Advice Really To Do?
I have been planning an article for a long time on the role of financial advisors in your life! In fact, we are talking about a nepper, a financial products distributor, or a legitimate value-added specialist? It is a very interesting question, because we cannot go beyond the experience of society that had to suffer in a negative sense in the mid-2000s. The real question is: Financial advisory in Hungary? If so, what are they doing now? How can they help you?
Financial Advice Summary of various services in Hungary. The man on the street is unable to distinguish the product (also) mediator from who he pays for his advice. In the same way, one who advises a company on behalf of a company is called a consultant in a uniform manner, as is the product of several companies (so-called independent financial advisors).
The most widespread financial advisor is the intermediary of the products
There are basically two main lines to distinguish. In one case we pay for the advice, in the second case we buy for the advice. The former case in theory means that the financial advisor cannot talk about specific products, he cannot give an offer – the advisory fee of 20-30-40 thousand forints per hour for his ordinary financial management advice. In the second case, however, counseling is free of charge for the client, as the advisor can provide the client with specific offers and solutions, which he then becomes entitled to commission on a commissioned basis. So in the second case, the consultant was paid by the financial service provider for his own profit on the product that the customer pays as a cost.
Is the consulting product really more expensive? The first negative experience for society was expensive mediated products. To this day, people think that if they go to a financial service provider (see insurance), they will get a cheaper product. This experience was real 5-10-15 years ago. However, as a result of enormous market competition, the MNB regulatory environment, and educational financial sites such as IFL, consultancy products are basically at the same price as market products, often the same products. Exclusive offers have some extra benefits in the context of a particular business agreement, the amount of which is always decided by the volume discount.
What does financial mean as financial advice?
A financial advisor can be either dependent or independent when he / she mediates a product. An independent financial advisor can bring the products of several financial service providers to the customer. However, there is a so-called allfinancial financial advice that is already exiting from the financial sector (insurance sector, banking sector or housing savings sector) and can meet customer needs with sector-specific advice and products.
Finance is a much more complex matter than talking about where to get insurance and where to pick up your credit. Allfinanz’s financial advisor is trying to provide a solution to this complex problem by being able to transfer loans as well as in relation to housing savings or retirement. This complexity is practically the same as the financial advisors we pay for.
So what’s the difference? These two more complex layers of counseling approach the question from a completely different direction. The paid advisor says he understands the relationship with the client and asks for money for everything. And an allfinan financial brokerage advisor says that you should not just talk about the relationships but actually help the client to make the best possible decision for himself.
Then why are they saying bullshit? It is often argued that anyone who mediates a product can no longer be independent, since it is in the interest of selling the product. It really is. It is also in the interests of the intermediary to sell as an advisor to whom we pay for his services. In the second case, you should not sell the product yourself, but you should be able to make sure you pay it before you make a pension savings, instead of talking to the difference between products with an allfinanz broker.
The key is strategic thinking
There are many financial advisors on the market. Nor can it be said that within a given definition (eg financial advisor), everyone would represent the same quality or approach. If we stay with the financial advisor (the number of which can reach 10,000 in Hungary), we must understand that there are those who work as a sales agent for a product group, while there are those who have the same theoretical and practical knowledge (or better) ) tell the customer as a paid advisor, only here is it possible to conclude the contract in one place, helping you in the election and conducting the business.
Yet very few think so! Fluctuation is amazing in the financial advisory business. This fluctuation is present in other professions, but due to the responsibility and seriousness of the profession, it is more prominent than, say, the removal of a shelf service from the area. This is because it is ultimately about people’s future and finances. An irresponsible decision or advice may throw people back for years, decades, or more than they can.
Responsibility is still a very small way of thinking! In my reading, the financial advisor must take moral responsibility even if the law in force does not provide for it. Moral responsibility means that I can assume the responsibility for the product or advice I have offered for 5-10 years, and I can protect its legitimacy if necessary. This can only be accomplished if the financial advisor acts in good faith at all times of his or her career and sees this field as a profession. Unfortunately, in reality, the huge fluctuation has a great deal to do with the “hope of quick enrichment”.
Commissions orientation can be a disadvantage and a blessing
Unfortunately, in 2018, we still have the same experience as in 2010. If you want to earn money quickly as a 18-20 year old, you have to go to real estate or play a financial advisor. Typically, there are two areas that have a very low entry limit, practically anyone can start without risking anything. And the loyalty of commissions obscures quality and longevity.
The systems are built when the professional and moral level of the young person is discovered on the go. On the other hand, due to the constraint on commissions, he is still in the role of financial advisor until the time of “professional dissolution”. It is obvious that you should not call yourself a financial advisor at this time, and it would be less likely to help people make financial decisions. Yet it happens, the cover of which is always a very comfortable and bright suit. Because suit suits expertise and seriousness to anyone.
However, commission can be an advantage for the customer! Think of the customer as a solution to your financial problem or your financial desire. In this case, you must make a contract with a financial service provider. Then why pay for counseling if there is one who can tell the same about the product and can give advice in strategic thinking? There is a tight layer in this area in Hungary who work for commissions, but work in the long term with the appropriate moral and professional knowledge!
The commission promotes joint cooperation in the long run. Think logically that there are all-financial financial advisors who live on commissions. The commission always arrives after the concluded contracts, not sitting behind a table, practically independent of performance and quality in the form of a monthly payment. If the advisor does not have up-to-date information, is not morally correct, then the clients will not return to it and will not recommend it again. In this area, it is physically impossible for 5-10-15 years to bring up cold customers every month. So in the long run, two types of financial advisors can make a living from a commission:
- who is the highest man and represents professional quality
- who has built a serious business in this area, where many financial advisors work “underneath”
Can a financial advisor be an ABC?
They are often brought to the attention of allfinanz financial advisory firms to operate as ABCs, with the most typical business organization functions:
- constantly organize members
- they work for commission
- financial advisors are actually product distributors
- always the top levels are the best
- wannabe transmit a sense of life
For me, ABC is a company where members are also consumers. So the revenue and turnover of the company depends on the regular purchase of the members. Here, they perform typical distributor tasks, as the ABC company has its own product that can be expanded by amateur “retailers” using their knowledge and communication channels.
It follows that, because of the activities of an allfinancial financial advisory firm, there can be no ABC as well
- they have no own product
- its turnover does not depend on the purchases of its members. Indeed, in many places, members are explicitly forbidden to be tied and commission restrictions imposed on them
- financial advisors are not product distributors, but rather qualified, financial market intermediaries