Financial advice

Financial Advice is advice given in relation to financial matters such as investing, insurance, borrowing, saving and retirement planning. Professionally, the advice is given only after the financial situation of the client is unveiled through a thorough fact-finding and analysis exercise. Many financial advisers also double-up as financial planners because their function is crossed in many areas. This principle of understanding the client's situation before advice are given is known as the 'know your client' rule. Once the client's actual financial situation is known, a set of prescriptions are provided by the financial adviser to solve those client's problems that are uncovered.

Financial advisers may or may not hold distribution contracts with financial institutions as part of their business. Those who do not are often referred to as Independent Financial Advisers (IFA) as they are not influenced by the commissions they get for recommending financial products, and hence, are considered less bias when advising their clients.

In some countries like Singapore and Malaysia, financial advisers are not individuals but companies who are licensed by the respective Authorities, such as the Monetary Authority of Singapore or Bank Negara Malaysia. Those individuals who represent these financial advisers (companies) are called financial adviser representatives. Those who give financial advice related to securities in Malaysia need a separate licence from the Securities Commission. Other institutions including insurance companies, investment companies, banks and lawyers may offer financial advice in addition to other services.

Many financial advisers see their profession as complementary to other professions who give legal advice, tax advice or medical advice. Financial advice in this context is a professional service with its own criteria and professional boundaries. The giving of financial advice is a regulated activity in many jurisdictions.

Generic financial advice

The government encouraging you to 'save more' and 'borrow less' is an example of generic advice.

Individual financial advice

To obtain all but the most arbitrary financial advice, a financial adviser must consider your financial position, your needs and your individual preferences.

This often means having a face-to-face interview with an adviser, although you can get advice in other ways, including by telephone, e-mail, or correspondence. In all cases, the adviser should gather information about you to find out your needs and circumstances. The adviser can then use this information to recommend a course of action that may or may not relate to a particular product or products.

It is possible to invest money or take out a mortgage or insurance without financial advice. For example you might buy from an adviser without advice, buy direct from a company over the telephone or internet, or for some products by responding directly to a mailshot or other advertisement. Buying investments without advice is sometimes called ‘execution-only’.

Financial advice that isn't advice

Many firms that sell financial products may give the impression they are offering advice. They may suggest that they have the best product or the best track record and 'recommend' you purchase it. This is not strictly advice, but more of a sales pitch.

A sure fire way to tell if you are being pitched or if your advisor is valid is to pay a separate fee for advice. The federal government holds fee for advice advisors to a much higher accountability level (called fiduciary responsibility) than advisors who do not charge and offer advice as "incidental" to the work they do. For example, if a securities broker does free financial planning, you can be assured that the planning is aimed at selling product. On the other hand if you hire a planner and he or she recommends insurance, securities, etc. you have advice.

See also

*Fee-Only financial advisor
*Financial Planner and Financial planning
*Stock broker
*Investment adviser
*Pension
*Investment
*Insurance

External links

* [http://www.moneymadeclear.fsa.gov.uk/ Guide for jargon on financial products and services] Financial Services Authority


Wikimedia Foundation. 2010.

Look at other dictionaries:

  • advice — ad‧vice [ədˈvaɪs] noun 1. [uncountable] information given to someone, especially by an expert, so that they know what to do and can make the right decision: • She will remain on the board and provide financial advice to the company. • a law firm… …   Financial and business terms

  • Advice of securities proceeds —   An ISO term. ISO Securities Message Types term. An advice sent by a financial intermediary acting as a collection agent and in response to a presentation of coupons, bonds, or other securities due for payment …   International financial encyclopaedia

  • Advice of redemption —   An ISO term. ISO Securities Message Types term. An advice normally sent by a custodian to its customer to give notice of a forthcoming redemption or maturity, or advice of the money amount and details of the completed redemption …   International financial encyclopaedia

  • Advice —   An ISO term.   ISO Funds Transfer Messages term. ISO Bank Card Originated Messages term. The affirmation that an action has taken place.   ISO Nostro Account Reconciliation term. A confirmation that a funds transfer has been executed. An advice …   International financial encyclopaedia

  • Advice of income in the form of securities —   An ISO term. ISO Securities Message Types term. An advice of an event related to income in the form of additional securities derived from securities held in custody or being traded in …   International financial encyclopaedia

  • Advice of money Income —   An ISO term. ISO Securities Message Types term. An advice of an event related to cash income derived from securities held in custody, or being dealt in …   International financial encyclopaedia

  • Advice of receipt/delivery of securities —   An ISO term. ISO Securities Message Types term. An advice which gives early information without all details, of a receipt or delivery of securities. It covers receipts and deliveries, both free and against payment. It will normally be followed… …   International financial encyclopaedia

  • Financial adviser — Personal finance Credit and debt Pawnbroker Student loan Employment contract Salary Wage Em …   Wikipedia

  • Financial planner — A financial planner or personal financial planner is a practicing professional who helps people deal with various personal financial issues through proper planning, which includes but is not limited to these major areas: cash flow management,… …   Wikipedia

  • Financial Services Authority — The Financial Services Authority ( FSA ) is an independent non governmental body, quasi judicial body and a company limited by guarantee that regulates the financial services industry in the United Kingdom. Its main office is based in Canary… …   Wikipedia


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.