How does the consumer recognize a reputable financial adviser?

How does the consumer recognize a reputable financial adviser?

With huge disruptions in the international financial markets over the past few years, from the bursting of the dot-com bubble, to the global economic crisis, to the spectacular state bankruptcy of Greece, consumers are more than unsure when it comes to their money. To make matters worse, consumers are overwhelmed by dubious offers that they can not see through at first and second glance.

It is not without reason that they often ask themselves whether the offers are possibly frauds . This is especially true if the financial advisor wants to sell them a particular product and the clients have no influence on the composition of their portfolio. However, customers can recognize serious and dubious offers with some background knowledge.


  • 1 What is a financial advisor?
  • 2 How to become a financial advisor?
  • 3 special cases in financial advice
  • 4 financial advisor for investment products
  • 5 For example, dubious financial advisers contact their clients
  • 6 Dirty financial advisers can be identified by this
  • 7 How can a reputable financial advisor be recognized?
  • 8 What does the financial adviser earn?

What is a financial advisor?

What is a financial advisor?

Of course, customers first of all need to know what a financial adviser is exactly. This is a service provider who first advises his clients on the possibilities of investing, insurance or credit and then sells them the corresponding financial products. The financial adviser can work as an employee of a financial service provider as well as freelance. In this case, however, he is usually contractually bound to service providers such as insurance companies or banks and may only sell their products.

How to become a financial advisor?

How to become a financial advisor?

Unlike, for example, the case of the insurance advisor, the concept of a financial adviser is not protected by law. That’s why dubious financial advisers sell only those financial products where the biggest commission goes into their pockets. If you want to work as an independent financial advisor, you only need a business registration.

It is true that on January 1, 2013, both the Trade Regulation and the Regulation on the Investment of Financial Investments were amended. However, on this occasion too, the job description has been neglected. However, at least financial advisors have since had to prove their expertise and were required to take out insurance, which is liable in the event of financial loss. However, this rule does not apply to advisers who work for capital management companies. The reason: These companies anyway require a permit from the Federal Financial Supervisory Authority, so they may even be commercially active.

Special cases in financial advice

A special business license requires financial advisors who want to arrange loans. Financial advisors wishing to obtain this permit must demonstrate that they live in orderly financial circumstances and are reliable. So in the past five years, they must not have been convicted of a criminal offense, nor may a bankruptcy on their assets have been opened. In addition, the financial adviser must follow the rules that apply under the broker and builders regulation.

Insurance advisors and agents also need a special business license. They only get these if they can prove their reliability and orderly financial circumstances. Furthermore, they must have a professional liability insurance with a sufficiently high level of coverage and have to prove their expertise by means of an appropriate examination at the Chamber of Commerce or another qualified qualification.

Here is an exception for insurance intermediaries who are bound to an insurer who is also responsible in the event of liability. They do not need the special business license and do not need to be able to prove their expertise.

Financial advisor for investment products

Financial advisors who advise their clients on financial investment products or who want to broker corresponding products must either have admission as fee-based investment advice in accordance with the German Banking Act or as a financial services institution for investment advice. However, this does not apply to the advice and mediation of investments, closed-end funds or mutual funds. However, they must provide proof of their expertise and a corresponding professional liability. Since 2013, financial advisors have been required to undergo this audit each year.

This is how rogue financial advisers contact their customers

This is how rogue financial advisers contact their customers

The initial contact is usually without prior notice directly at the front door or via telephone. For some time, customers have also increasingly unsolicited offers sent by e-mail. However, it is by law forbidden for the financial adviser to contact potential clients unless they have expressly agreed – but in practice, there is hardly any prosecution if this prohibition is violated, many dubious financial advisors ignore it. A reputable representative of this service division, however, waives such phone calls, unless the customer already has a contract with him.

In this dubious financial advisers can be seen

An important criterion is that the financial adviser contacts the client without his prior consent. In addition, dubious financial advisors often use terms such as “risk-free,” “optimize retirement,” or “save taxes,” to make customers curious about their offerings. In order to exert moral pressure, dubious financial advisors often answer questions with counter questions. They also try to establish a basis of trust by pointing out that they have been recommended by a friend to the customer.

A dubious financial adviser can also be recognized by the fact that he promises high returns without risk. Especially with financial products, however, the principle that the higher the return the customer can expect, the higher the risk, the higher the risk. In addition, the consultant only gives verbal promises on the topics of risk, maturity and return. If these promises are not kept, the customer can not prove the statements – unlike written pledges.

The urge for a quick signing of the contract is another characteristic of dubious consultants. However, the customer has no cause for urgency because there are countless financial products on the market. Often, customers also receive their prospectus only after they have signed the contract. However, it may also be worthwhile to consult the register of the Federal Financial Service or the competent IHK. If a corresponding entry is missing there, highest care is required.

How can a reputable financial advisor be recognized?

A reputable financial adviser is characterized by the fact that he not only gives the customer sufficient time to review the documents, but also recommends that he seeks a second opinion. This can be, for example, the tax consultant, but also a consumer center. Furthermore, the financial advisor also confirms the important facts in writing and hands over the corresponding document to his client. He also expressly informs the customers that they have a 14-day right of withdrawal should they subsequently have doubts about the meaning of the financial statements.

What does the financial adviser earn?

Basically, customers pay the financial advisor for their service. Most financial advisors work as freelance agents on a commission basis. In other words, the more financial products they sell and the more they cost, the more they earn. Therefore, dubious advisors are also pushing for quick deals and usually directing the conversation directly to a particular product.


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