Financial advice – What is it?

[ BACK ]

Learn how to best manage
your portfolio with the help
of MoneyController's explanations.

Financial lexicon Financial lexicon

Financial advice is the planning and monitoring of investments in financial resources by one or more individuals or a company who choose to use a financial expert to manage their resources efficiently. Serious financial advice therefore deals with the management of the portfolio of these subjects with the aim of achieving the best possible solution in terms of financial balance. Both companies and private investors who want to invest their savings usually resort to financial advice.

Every European investor is free to entrust his or her savings to an investment broker, but also to an independent financial advisor who is also bound by the provisions of the European MIFID (Markets in Financial Instruments Directive). In Germany, financial advice is a financial service in accordance with Section 1 (1a) No. 1a of the KWG if it includes investment advice. Without investment advice, financial advice is subject to banking supervision in accordance with the reference laws (see Section 1 Paragraphs 1-3 of the KWG).

As mentioned, serious advice has an important purpose: to improve the financial well-being of a family, a person or a company, but also to plan the management of financial resources with a positive impact on the future. The advice can help businesses achieve and improve the financial balance of the resources’ administrative costs. In the same way, by reaching out to small savers, it can structure useful accumulation or savings plans for them. Provision for old age also plays a decisive role in financial advice. More and more people have to make early retirement provisions themselves. Reputable financial advisors can recommend a company pension plan, or one that is most suitable for their clients.

Financial advisors offer financial advice. They can work independently and thus be referred to as an independent financial advisor, or they can work professionally with other financial advisory firms. Financial advice can be a free service, like investment advice at banks or other financial service providers subsidised through the sale of home products. Independent financial advisors, on the other hand, incur consulting fees (fee-based advice). Fee-based financial investment advisors require a business license in accordance with Section 34h (1) of the GewO.

MoneyController also suggests