A financial advisor is a professional who advises and provides financial services to clients based on their financial situation. In many countries, Financial Advisers must complete specialized training and hold licenses to advise. In the United States for example, financial advisors are licensed under Series 65 or 66 and according to the US Financial Industry Regulatory Authority (FINRA), licensing appointments and compliance issues should be reported for public view. FINRA describes a major group of investment professionals who may use the term "financial advisor": brokers, investment advisers, accountants, lawyers, insurance agents, and financial planners.
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Roles
Financial advisors usually provide clients/customers with financial products and services, depending on the license they hold and the training they have. For example, an insurance agent may be eligible to sell life insurance and variable annuities. A broker can also be a financial planner. A financial advisor can create a financial plan for clients or sell financial products, or a combination of both. They also provide some insight into saving
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Compensation
Financial advisors are usually compensated through fees, commissions, or a combination of both. For example, a financial advisor may be compensated in one or more of the following ways:
- Hourly cost for consulting services
- Fixed costs, such as $ 3,500 per year, for annual portfolio reviews or $ 5,000 for financial plans. This is often referred to as 'Flat Cost Advisor'
- Commission on securities purchased or sold, such as $ 12 per trade
- Commissions (sometimes called "loads") are based on the amount invested in a mutual fund or annuity variable
- A "mark-up": when someone buys a "home" product (such as a bond held by a broker in inventory), or "mark-down" when they are sold
- Charges for managed assets, such as 1% per annum of managed assets
Advisor vs. adviser
Both spellings, advisory and advisor , are accepted and indicate someone who advises. According to one textbook, advisors and advisors can not be exchanged in the financial services industry, since the term adviser is generally used "when referring to legislative acts and their requirements and advisors when referring to a practitioner.Because [financial advisory practice] is never described as a practice of giving advice, counsel is preferred when not referring to the law. "Congress and the Stock Exchange Commission refer to" investment "when discussing their regulations in the Investment Advisory Act of 1940.
Rule
United States
In the United States, the Financial Industry Regulatory Authority (FINRA) regulates and oversees the activities of brokerage firms, and their registered representatives. The Securities and Exchange Commission (SEC) organizes investment advisers and representatives of their investment advisers. Insurance companies, insurance agents, and insurance manufacturers are regulated by state authorities. Investment Advisors may be registered with the State Regulatory Agency, the Securities and Exchange Commission, or under certain exceptions, remain unregistered.
Fiduciary Standard
The anti-fraud provisions of the Investment Advisor Act of 1940 and most state laws impose obligations on Investment Advisors to act as fiduciary in dealing with their clients. This means that the advisor must hold the interest of the client on his own in all respects. The Securities and Exchange Commission (SEC) has said that an advisor has the duty to:
- Make investment recommendations justified independent of outside influences
- Choose a merchant-broker based on their ability to provide the best trading execution for accounts in which the advisor has the authority to choose a broker-dealer.
- Make recommendations based on reasonable investigations into client's investment goals, financial situation, and other factors
- Always place the client's interests in front of him.
Since the financial crisis of 2008, there has been a great debate over fiduciary standards and which should be applied by advisors. In July 2010, The Dodd-Frank Wall Street Reform and Consumer Protection Act mandated increased consumer protection measures, including enhanced disclosures and authorized the SEC to extend fiduciary obligations to include brokers rather than only advisors governed by the 1940 Act. In July 2016 , SEC has not extended fiduciary obligations to all brokers and advisers regardless of their appointment. However, in April 2016, the Department of Labor completed a thousand-page rule that holds all brokers, including independent brokers, working with retirement accounts (IRA, 401k, etc.) to fiduciary standards.
In June 2016, as a way to resolve advisory interest conflict, the Department of Labor (DOL) decided in redefinition about what constitutes financial advice, and who is considered a fiduciary. Prior to 2016, fiduciary standards apply only to Registered Investment Advisors (RIAs), and have no impact on brokers, which previously operated under less stringent "conformity" standards that provided allowances for education without "advice." The new regulations require all financial advisors who offer advice for compensation to act as fiduciary and meet fiduciary standards, but only when dealing with retirement accounts such as IRA or 401 (k) s. The award includes one exception for the broker, the Best Interest Contract Exception (BICE), which may be permitted if the broker enters into a contract with the plan participants and meets certain behavioral requirements. The new rules do not affect the advice or sale of investment products related to non-pension accounts.
Opposition to fiduciary standards maintains that a higher standard of fiduciary duty, vs. a lower standard of conformity, would be too costly to implement and reduce choice for consumers. Another criticism indicates that consumers with smaller retirement accounts may be less able to access personal advice because of the advisory/brokerage compensation model, many of which have been restructured to comply with fiduciary rules.
The decision has led to major changes in the financial community with 73% of those with an interest in the rule will have a negative impact on how they do business, 71% anticipate an increase in client frustration and 66% plan to reevaluate the products they recommend.
The enforcement of the rules starts on June 9, 2017.
Registration
A Registered Investment Advisor (RIA) refers to IAs listed in the SEC or state securities agents and usually provides investment advice to retail investors or registered investment companies such as mutual funds, or exchange-traded funds. The Registered Investment Advisor is regulated by the SEC or by individual states, depending on the amount of assets administered.
Canada
The role of financial advisors in Canada varies. Most financial advisors carry licenses to sell life insurance, securities, or mutual funds, or a combination of all three. Life insurance licenses are earned through successful completion of the life license qualification program, except in Quebec, where permissions are settled through financiers AutoritÃÆ' Â © des marchÃÆ'Â © s. There are three different securities licenses available. The completion of the Canadian Securities Course (CSC) allows the sale of most types of securities, including stocks, bonds, and mutual funds. Further licensing is required for the sale of derivatives and commodities. The completion of a mutual fund course allows advisors to sell mutual funds only, excluding specific and important types of funds, exchange-traded funds (ETFs) - although recently licensed non-securities financial advisers have gained access to ETFs through new mutual funds. product funds. A third possible license is an excluded securities license.
In many cases, but not all, permissions require the support of a dealer or insurance company. It is also mandatory for advisor to bring Mistakes and Insurance Negligence. Long term financial advisers can refer to the entire spectrum of advisers. In general, industry in Canada is divided into three advisory channels: MGA, MFDA, and IIROC. However, there is little regulatory control over the use of the term, and, thus, many insurance brokers, insurance agents, securities brokers, financial planners and others identify themselves as financial advisors.
Many financial advisors in Canada are also financial planners. Although there are many appointments for financial planning, the most common is the designation of certified Financial Planners even though Registered Financial Planner (R.F.P.) and Personal Financial Planner planner are also popular in Canada. There are no rules outside of Quebec, the term "Financial Planner".
United Kingdom
There are three main bodies that provide qualifications for financial advisers in the UK. The main one is the Chartered Insurance Institute, which offers qualified professional financial services from beginner to graduate level. IFS School of Finance offers alternative courses/qualifications in specific specialist areas such as mortgages and equity disposals. The Financial Planning Institute offers Certified Financial Planners.
In the UK, investment advice is provided by a financial advisor or stockbroker.
The financial advisor must pass a series of exams and receive a Financial Planning Diploma (or, prior to the Retail Distribution Review, Financial Planning Certificate) and also be authorized by the Financial Conduct Authority, qango of the UK government to be satisfied that the advisor is "fit and proper" before they can practice. Usually a diploma qualification advisor will have DipFA or DipPFS after their name.
Title Chartered Financial Planner is the most widely accepted "gold standard" qualification available for professional financial planners/financial advisors in the UK.
Financial advisors are limited or independent. Independent financial advisors are free to choose suitable solutions for clients of all products and providers in the market. An adviser who is not free to choose from across the market, for whatever reason, is restricted. Counselors may be limited because they only advise on certain areas, such as retirement, or because they only advise on products from one company such as a bank.
The best advice is a concept that is never more than a post in FSA/PIA/NASDIM rules (and is now withdrawn for 'appropriate' standards) and which refers to a general obligation under the Contract of Contract that the broker must find the right 'financial product' to match the client's needs. Provider companies may not make recommendations unless they have the right products to offer. If it does not offer a suitable product then nothing is recommended. Multi-bound companies may not make recommendations unless they have access to the appropriate products from providers in their panels. In the UK many believe that impartial advice can only be obtained in consultation with independent financial advisers.
Republic of Ireland
The determination of the QFA ("qualified financial advisor") is provided to those who pass the Professional Diploma in Financial Advice and agree to comply with the ongoing "sustainable professional development" (CPD) requirements. This is a recognized benchmark marking for financial advisors working in the field of retail financial services. Qualification and attach the CPD program, fulfilling the "minimum competency requirements" (MCR) specified by the Financial Regulator, to advise and sell five categories of retail financial products:
- Savings, investments and pensions
- Housing loans and related insurance
- Consumer credit and related insurance
- Shares, bonds, and other investment instruments
- Life insurance protection policy
New Zealand
The National Certificate in Financial Services [Financial Advice] [Level 5] is currently being introduced in New Zealand. All registered Individuals and legal entities that provide financial services must be registered as (Registered Financial Service Provider). Directors, their retail and sales staff are required to obtain a national certificate.
New Zealand Qualification Authority (NZQA) in conjunction with industry groups through ETITO maintains a qualification framework for qualifications. Registration and examination conducted by ETITO. All financial advisers are required to register to ETITO by March 31, 2011 at the latest.
The Qualification Framework consists of a set of core competencies, A B C followed by 2 options covering specialist areas such as Residential Property Insurance and Residential Loans. Qualifications approved by a particular NZQA such as an Accounting degree may exempt students from competencies established by NZQA-approved Training. This certificate is offered by an accredited organization.
South Korea
In South Korea, the Korea Financial Investment Association oversees licensing of investment advisors.
Australia
Financial advisers in Australia must pass the RG146 qualification and be licensed by the Australian Securities and Investments Commission. In addition, financial advisers in Australia are subject to fiduciary duty.
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See also
- Collective investment scheme
- Socially Responsible Investment
- Robo-Advisor
References
External links
- AIFA Independent Financial Advisory Association - British Trade Agency
- FCA Financial Conduct Authority (UK) website
- NAIFA Insurance National Association & amp; Financial Advisor
- SEC IA Search SEC Database from US Registered Investment Advisor
- EURFPA European Financial Planning Association
Source of the article : Wikipedia
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