Caution: Financial Advisor. Investment consultant When you need a financial consultant

Financial Consultant is a specialist engaged in consulting in the field of financial policy, who can work either independently or as part of a company’s staff. The profession is suitable for those who are interested in mathematics and economics (see choosing a profession based on interest in school subjects).

Features of the profession

A financial consultant is a specialist engaged in consulting in the field of financial policy, who can work either independently or as part of a company’s staff. By the way, a company engaged in financial consulting can also be referred to by the phrase “financial consultant.”

People turn to a financial consultant for help when they need to make some strategic decisions or assess the state of the company’s finances. For example, you need to determine the concept of financial management, the feasibility of buying or selling debts, make a decision on the sale or purchase of securities, and analyze the resources of the enterprise.

Some companies require the ongoing assistance of such a consultant. For example, they need a person who is able to develop a competent investment policy, schemes for working with banks, assess the creditworthiness of an enterprise and determine ways to improve it, help with advice on capital management (select sources of replenishment, calculate growth rates, etc.), predict the consequences of certain or other actions. In such cases, the company cooperates with the consultant on an ongoing basis or even enrolls him on its staff.

A financial consultant can also specialize in a certain area: attracting investments by issuing securities (investment consultant), investing in securities of other companies, asset management, etc.

It must be said that not only any company, but also an ordinary person who needs to figure out how best to invest their money can turn to financial consultants for help. The consultant helps you develop personal financial plans, open an investment account, choose a suitable mutual fund, stocks to buy, etc.

So far, only a few Russians can plan any serious financial investments. Most of our compatriots are content with savings books or keeping cash “under the mattress”. But gradually, with the growth of the so-called middle class, the need for financial advisors is growing.

In order for the advice to be truly practical, a financial expert constantly monitors the state of the stock market, analyzes its trends, and monitors changes in financial legislation. It is impossible to give advice on whether to invest or not to invest in a company without analyzing its position in the market. The financial consultant also conducts such analytical studies and is responsible for their accuracy.

Workplace

The profession of a financial consultant allows you to work as an independent expert, in a consulting firm, as well as on the staff of a company that needs constant assistance from a specialist.

Salary

Salary as of September 17, 2019

Russia 15000—120000 ₽

Moscow 50000—250000 ₽

Important qualities

The profession of a financial consultant requires high responsibility, honesty, excellent intelligence, mathematical abilities, good memory, attention to detail, and the ability to build relationships with clients.

Knowledge and skills

A financial consultant must have excellent knowledge of financial legislation, the structure of the financial market and its development trends, know the system of financial instruments, methods for assessing financial assets, the profitability and risk of financial investments, the procedure for issuing and purchasing securities.
It is necessary to know the lending procedure, the principles of financial control, taxation, financial accounting and reporting standards, the basics of accounting, and much more. etc.

Where to study to become a financial consultant

In this course, you can obtain the profession of a financial consultant remotely in 1-3 months. Diploma of professional retraining established by the state. Training in a completely distance learning format. The largest educational institution of additional professional education. education in Russia.

In the context of the development of the current financial and economic market, financial literacy is vital for an ordinary person. The profession of a financial consultant is becoming increasingly in demand. If at the dawn of the formation of a market economy in Russia the services of such specialists were actively used by business owners and managers, today ordinary people increasingly need the help of a competent financial consultant.

Features of the profession

The emergence of the financial advisor profession is a requirement of the times. It is simply impossible to understand the intricacies of this type of activity without special education and experience. The emergence of new opportunities, primarily related to investment, opens up certain prospects for individuals and legal entities. The help of a professional in the investment market is the key to a successful investment.

How great is the real need for this kind of specialists? For legal entities, financial consultants are truly necessary, and their task goes far beyond investing. As for individuals, it all depends on how active the person is in the services market, whether he is interested in increasing capital, and whether he has serious problems with budgeting.

The state is interested in improving citizens' financial literacy. Hence the support for relevant programs to increase the level of knowledge in this area, training of students, development of legislative norms regulating the activities of financier-managers.

The format for providing consultation services can be different:

financial analyst, full-time employee of the company;
independent financial consultant;
a law firm providing consulting services in the field of finance and economics.

It is convenient for ordinary people to work with independent specialists who have undergone appropriate training. However, choosing them is not so easy. The profession of a financial consultant is becoming increasingly popular, and the problem of training professionals naturally arises. In public and private universities there is no such specialty as a financial consultant. Training takes place in basic specialties at economics departments in higher educational institutions.

A trained financial consultant must have excellent knowledge of the specifics, theory and practice of the services he provides:

In addition, a diploma of completed training is not enough. The consultant must be a practitioner, that is, have real experience in employment in the specialty in the main or related areas: accounting, insurance, business process analytics, lending, audit, etc.

Family financial advisor

Involving third-party specialists in managing the family budget is one of the demands of the time. Even with a basic economic education and knowledge of legal legislation, a person may simply not have enough time to analyze the situation and study the most advantageous offers.

Hence the need for this kind of specialists. A personal financial advisor is the person who will solve problems with money and other assets, suggest the most profitable and safe course of action, and help you make the right decision.

What does he do?

A professional can really help an ordinary person, and the areas of cooperation can be different.

A financial consultant for individuals provides the following services:

The most common service is drawing up physical forms. A financial consultant develops a set of measures that help improve the well-being of a family or one person. Other types of assistance can be aimed both at the future and at a momentary resolution of the current problem. Thus, consultation with a financial consultant will help ensure a comfortable old age, accumulate money by a certain date, and receive income from existing capital without serious risks.

If a person has any problems with a bank loan or needs help submitting a return to the tax authority, then a personal financial consultant can take care of all the issues.

Requirements for a specialist

Lack of experience in the field of financial and legal activities can lead to fundamental mistakes and worsen the client’s well-being.

A family financial consultant must meet the requirements for specialists in this field:

In some cases, specialists need knowledge of a foreign language, experience in communicating with government agencies, experience in personal sales, and psychology.

How to find a financial advisor? The easiest way is to use advertising. However, it is important to understand that reviews on sites may be paid, and the information may be unreliable. Therefore, the safest thing to do is talk to a specialist, make sure that he has a diploma, recommendations from real clients and personal success in the field of financial management.

What the law says

Since a financial and legal consultant has full access to the client’s money, legislative regulation of the relationship between them is necessary. When entrusting your well-being to a stranger, you need to be, firstly, confident in his competence, and secondly, have legal protection in case problems arise.

Existing laws " About the securities market" And " About self-regulatory organizations in the financial market» require amendments in connection with the expansion of the boundaries of the provision of services to both the population and legal entities. Over the past years, the State Duma has been developing relevant documents. However, the law on financial advisers has not yet been adopted.

About the internal and little-known side of the business of financial consultants in Russia. We join Sergei’s conclusions regarding the dangers of the financial products themselves and the forms in which they are presented to clients. From the article it becomes clear why many consultants are so actively offering structured products, endowment insurance, so-called Unit-linked (ULIP), investments in foreign real estate, microfinance organizations and other dubious organizations.

It is important that we are not talking about the practice of one consultant or company. This form of business is taught to new financial advisors.

In his blog, Sergei Spirin asks to support the discussion of this topic. We also join this request. The topic looks extremely important, especially in light of the formation of norms and rules according to which our financial community will develop in the future.

This article has been sitting in my computer folders for a long time. I wrote it in draft a couple of months ago, but for a long time I did not dare to publish it, realizing that after publication my relations with most of the Russian financial advisors would be ruined.

But the truth is more precious.

Unfortunately, recently events in the field of investment consulting in Russia have been developing in accordance with the phrase “the further, the worse.”

The immediate reason for my interest in this topic was Natalya Smirnova’s meeting with FinancialOne magazine on the topic “How to become a successful financial advisor?” A recording of the meeting was posted as a video on YouTube channel FinancialOne.

Why am I spending time on this meeting? The problem is that Natalya Smirnova has recently been presented as “probably the most titled and famous financial advisor in the Russian Federation” (Konstantin Poltev, 0:40 on video No. 1), called on TV, radio and meetings, it is she has long been involved in the development of a bill to regulate financial consultants, and more recently has been training financial advisors.

One person's misconceptions are not a problem. They become a problem when multiplied by circulation.

Let me make it clear right away: it’s nothing personal, the problem is not with Smirnova personally. The practice she talks about is typical, perhaps, of most Russian financial advisors. The only difference between her and others is that the rest prefer to make money quietly, without drawing attention to the methods of their work, and Natalya had the imprudence to bring the story of her activities to a wide audience. Therefore, let us thank her for the opportunity to discuss the problem using her materials as an example, and consider what the “secret of success” of Russian financial advisors is.

There are currently three video parts posted on the FinancialOne channel. I was most interested in second part of the meeting. It discusses the earnings potential of a financial advisor.

Here is a slide from Natalya Smirnova’s presentation, which displays possible sources of commission income for financial advisors (in the video - from 7:24, before that the cost of consultant services that are not commissions was discussed).

The slide lists the instruments that Russian financial consultants sell, and on which the financial consultant can earn commission income.

Natalya Smirnova’s own attitude towards these types of commission income is apparently expressed by her own phrase “If you can take it, then why not take it?” (7:58). Natalya avoids the question of the ethics of offering these products by consultants, with phrases like “Naturally, the more money you take for yourself, the less money the client will have, but this is a matter of how your business operates” (12:05). From the answers it is clear that Smirnova herself sells at least some of the listed products.

You may be asking: what's wrong with this table?

Everything is like this in the table. The question is in what sauce this information is presented to the public, and about the attitude of the financial consultant towards it.

Imagine learning to become a doctor or interviewing “How to become a successful doctor?” First they tell you about the regulation of this activity. Then about the cost of services - how much you can charge a client for a meeting with him, for tests and procedures. Already here bewilderment arises - is this exactly where a future doctor should start telling about his activities? But then the cynicism begins to go off scale - they tell you how much you can earn by selling certain types of expensive drugs to clients.

Natalya doesn’t even realize the cynicism of what she’s talking about. Just an everyday story about my activities and the activities of my colleagues in the industry. Let me remind you, under the general heading “How to become a successful financial advisor.”

Would you like to get an appointment with a doctor whose income does not depend at all on whether the doctor solves your problems, but is directly dependent on how expensive the medicines he sells you?

Please note: during the interview meeting we talk about what a financial adviser should do, what client problems he solves, in what ways, what he should know, etc. and so on. - doesn’t even arise (so far only the first three parts of the interview have been published, but I listened to the full version - there’s not a word about that either). It's mainly about how to get more money from the client.

Let me discard excessive political correctness and write what the list of financial products kindly presented on the slide by Natalya Smirnova should actually be called.

This is, in essence, a “black list” of products that an investor should NOT purchase. This is a marker, a sign “Caution, danger!”

This is a list of products from which an investor should run as fast as he can. And if suddenly an advisor offers you products from this list, run away from such a financial advisor.

I could go into detail about each of these products and explain why each of them, in most cases, would be wildly unprofitable for the client.

However, this will take a lot of time, since the principles of scamming clients for money are different in each of the above cases. Therefore, I will use the famous formula, which was formulated long ago by Helvetius: “Knowledge of a few principles replaces knowledge of many facts.”

And the principle of the consultant’s work is, in fact, very simple: the consultant, in exchange for his advice, takes part of the investor’s profit. Yes Yes exactly. Investment income is not generated by numerous intermediaries, but by the business behind the investment - the issuers of shares and bonds.

The investor's income is equal to the income from the investment minus the fees of various investment intermediaries. These financial intermediaries include both a financial institution that develops investment products (bank, insurance company, pension fund, credit cooperative, real estate agency, hedge fund, dealer, broker, manager, etc., etc.), and and a financial advisor himself.

How can they collectively extract more money from investors? To do this, the financial institution must develop a product in which very large commissions will be charged to the investor. And in order for this product to be sold, large commissions will have to be paid to sellers - financial consultants. Moreover, to make it profitable for consultants to sell these particular financial products, commissions on them are often deliberately further artificially increased.

At whose expense is this banquet? Who will ultimately pay for it? Of course, an investor.

Contrary to popular belief, neither financial advisors nor other financial intermediaries are capable of increasing client profits. This is proven by numerous studies - I will refer to the brochure “Vanguard Principles of Investment Success - Part 3. Minimize costs” - http://assetallocation.ru/vanguard-investing-principles-3 - which provides lists and results of such studies.

As John Bogle rightly noted, the famous saying “you get what you pay for” does not work in the investment business. In the investment business, on the other hand, you get what you do NOT pay for. Any reduction in investment expenses increases the investor's income.

Any investment product for the sale of which investment companies are willing to pay extra to the seller is a product that, as a rule, is wildly unprofitable for the investor. Natalya Smirnova calls these products “marginal”. Let me call them more frankly: these are products with exorbitant, sky-high commissions, which in the overwhelming majority of cases are harmful to the investor.

At the same time, the fees charged by financial institutions to clients can be either explicit or deeply hidden, as, for example, in structured or insurance products. But you can rest assured that if commissions are paid to the seller of investment products, these commissions are always paid at the expense of the investor. It simply cannot be otherwise.

By the way, what products should a financial advisor offer an investor?

In the interview with Natalya there is not a word about this at all, but I will tell you very briefly (a detailed story, unfortunately, will not fit into the format of the article).

These are, first of all, stocks, bonds, money market and commodity market instruments, as well as mutual funds and ETFs based on these products.

But financial advisors are almost never (with rare exceptions) paid anything for selling these products?

That's it.

And that is why these products will be most beneficial for the investor. The seller's markups, both explicit and hidden, in this case will be minimal. And in this case, the investor will receive the maximum part of the income generated by the business (issuers of shares, bonds and other securities).

(I will write in parentheses that, of course, individual brokers and investment funds can also have high commissions. However, their commissions, as a rule, are open, public, and it is easier to compare them with each other, choosing the right options)

So what does a financial advisor need to live on then? - perhaps you ask?

My answer is unlikely to find understanding among the vast majority of today's Russian financial advisors. But over the years, I have developed the belief that the only way the advisory business can be honest and investment advice unbiased is if the financial advisor receives a fee from the client and only the client.

And at the same time, it has no “commission income” at all - income from sales of any investment products. Those. has no agreements with any financial intermediaries.

In Western slang, this business model is called “fee only”. Please note - not “fee based”, but “fee only”. The difference between these two terms is described: (for a complete understanding, you may have to read the entire book, from the very beginning, which I strongly recommend you do - for those who plan to work as a financial advisor, this is a must read).

Only such an adviser has the right to call himself “independent”.

Yes, I am aware that the number of such advisors on the Russian market is extremely small.

And yet

It seems to me that it would be right if, at all kinds of training courses for financial advisers, of which there are now many, and the quality of which makes me deeply sad, future financial advisers were told, first of all, about this business model.

And not about how to get more money from investors by selling them expensive, unprofitable investment products.

P.S.
I would like to see this article widely discussed, but I fear that it will be disadvantageous for financial advisors to communicate this information to their clients. Therefore, a quick request to my investor readers: please help disseminate this article. Reposts, reprints on other investment resources on the Internet, likes, etc. are welcome in every possible way.

Everyone strives to achieve financial independence. But how to do that?

Financial literacy is not included in the curriculum in secondary and higher educational institutions, unless you are pursuing a corresponding profession. It is quite difficult for an unprepared person to understand the flow of economic information, which, moreover, tends to change quickly. You will need an independent financial advisor who can help you not only maintain a stable level of income, but also increase it.

What are the services of an investment consultant?

An independent consultant analyzes the client’s situation, evaluates his resources and develops a strategy. The result is clear recommendations explaining how to preserve and increase existing funds.

Of course, you can manage your money turnover yourself, at your own peril and risk. But if you want to succeed in planning your own future, you must understand the structure of markets, be able to correctly assess income and expenses, and take into account risks. You should also know the procedures for issuing and purchasing securities, the procedure for obtaining loans and their quick and painless repayment, the principles of financial control and taxation, reporting standards and much more. A financial or investment consultant is well versed in all these issues. Its services allow you to save not only your money, but also time.

An independent investment advisor is not associated with other market players and has a wide selection of investment products. Due to the absence of conflicts of interest and an individual approach, the expert’s assistance allows the client to derive maximum benefit.

Why is it beneficial to receive the services of an investment consultant in our company?

Our main advantage lies in the professional approach of experts. An investment consultant performs important functions:

Regularly monitors market trends
Receives information about new investment instruments and other opportunities
Conducts constant monitoring of legislation, so is always aware of the latest changes

The services of a financial advisor in Moscow are provided by the company absolutely free of charge - we receive a commission not from clients, but from our partners.

Most often, novice investors or individuals interested in optimizing expenses and achieving certain goals resort to the services of an investment consultant. A specialist will help:

Create a personal financial plan
Achieve your goals (save for education, increase retirement savings, receive income from investments and many others)
Learn to manage capital wisely

A financial advisor helps individuals manage their personal money wisely. The article talks about what a personal financial advisor is, how he can help - and how you can find such a specialist.

1. What is the problem

The problem for many people is that they do not control their cash flow. And as a result, they live chaotically, not understanding where they are going financially.

Imagine that I turn the key, start the engine and start driving. However, I have no purpose for the trip. But then it doesn't make sense. And it’s better for me to stay at home until I decide where I need to go.

If we talk about money, then we are all inevitably involved in constant financial movement. After all, every day we carry out various monetary transactions.

And it depends only on ourselves how conscious this movement will be on the scale of our entire life. To control the future we need:

Manage your cash flows;
Transform the future into a set of clear, measurable financial goals;
Make a plan to achieve these goals;
Execute your plan.

This is a general situation that a financial consultant works with. Along with this, a special case is also possible.

A person already clearly understands what problems he is striving to solve. He just needs a specialist who will help him choose the right strategy to achieve his goal. And will offer optimal tools for solving important problems.

In both of these cases, you will benefit from a personal financial advisor.

A financial advisor helps a person achieve his important financial goals in the optimal way. This can be represented schematically like this:

Long-term financial planning is an important part of the work of a financial consultant

If you are going on a hike, you need to understand where you are starting from and where you want to end up. You need to make this path during daylight hours, go around a steep gorge, and ford the river. Taking these circumstances into account, the route will be laid out.

This is the kind of work a financial advisor does for his client—helping chart a path to the future of the financial landscape. And to do this, the financial planner will ask you questions:

What is your financial situation now (=point A)?
Where do you want to be in the future (=point B)?
What resources are you willing to use (start-up capital, savings time, and cash flow for investment)?

With this in mind, the path to your financial goals will be paved. In fact, a financial advisor is your guide in unfamiliar financial terrain. He knows where the ford is - and where there is a steep gorge that is worth going around. And with this in mind, he will pave a safe path for you.

Well, understanding the big picture, let's talk about the details.

2.1 Study of the current situation (point A)

Why is it important? If we mentally return to the campaign, the finishing time directly depends on how fast the squad moves. In financial planning, the speed of movement towards the goal is determined by your cash flow for investment.

To calculate this cash flow, you need to subtract its expenses from the family's income. You can invest part of this difference.

It is also necessary to analyze the assets and liabilities of the family, because they are the sources of its income and expenses. And often the liquidation of unnecessary or expensive assets increases the income-expense gap. And thus, it will allow you to move forward faster.

Having done this work, we understand your current situation and know your savings budget. And let's move on to the next step.

2.2 Description of your financial goals (point B)

It should be noted here that long-term financial planning involves major financial tasks. Here we are not discussing saving for the next vacation, or buying a new gadget.

What problems are discussed most often? For most people this is:

Financial protection of the family;
Formation of funds for higher education of children;
Increasing the current standard of living;
Creation of pension capital for spouses;
Savings for large acquisitions (for example, a country house);
Creating an inheritance for children.

Of course, each person has his own set of personal goals. And this general list is always adjusted to take into account the unique tasks of a particular person or family.

At the end of this stage, we formulated several goals that are important for a particular person. For each of them, the amount required to solve this problem is determined. And the time frame within which it needs to be resolved.

2.3 We draw up a personal financial plan (LPP)

This stage is the development of the optimal route to your financial goals. LFP is the main tool for personal financial planning:

A person’s financial plan is the main tool for long-term planning

And it is applied as follows. We enter into the LFP your initial capital, cash flow for investment, and the planned profitability of the investment portfolio. As a result, for each year in the future, the LFP calculates the amount of a person’s personal capital at that moment.

Knowing the amount of future capital, we can assess the achievability of your goals. We are ready to answer questions such as: will the family be able to pay for their children’s higher education and buy a house on time? And will the parents be able to retire at the age when they want it?

It often happens that with the allocated savings period and budget for investment, important goals are not achieved on time. And then changes need to be made to the plan.

In this case, we consider additional plan scenarios in which you can:

Invest more, or
Reduce target size, or
Postpone the deadline for its achievement to a later time, or
Combine these options.

As a result of additional calculations, a plan is born that completely suits my client. Because important goals are achieved in it in the required time frame, and with a budget that is comfortable for the person.

It is also important to understand that the final physical therapy exercise itself is a step-by-step plan towards your personal goals. Take it and do it - to achieve what is important to you.

In addition, let’s not forget, a financial plan is an exact mathematical calculation. And these calculations irrefutably prove that your goals will indeed be achieved at the right time in the future if you move along this path.

Thus, your large, distant financial goals turn into a chain of simple actions. By doing them on autopilot, you are guaranteed to move towards your important goals.

Download my pdf report on the topic:

2.4 Issue of contracts to implement the plan

When the route is laid out, it’s time to hit the road. In personal finance, this means you need to start your investment program.

With this approach, a person forms his investment portfolio. It is called passive because the investor does not try to actively manage the contents of his portfolio, shaking it up every time there are changes in the market.

Such a portfolio should consist of several asset classes. The proportions of different assets in the portfolio are determined by your risk appetite and the return you would like to receive.

Therefore, the job of a financial advisor is to determine your risk profile and then help you choose the optimal investment instrument. Often this is a brokerage account, or an investment plan wrapped in insurance. A personal advisor will help you open the selected instrument.

2.5 Continued support on your journey

So, you have started your journey. And this is already very important, because the beginning is half the battle. But the road is long, and a financial advisor will help you along the way.

Perhaps your plans or attitude to risk have changed, and adjustments to your investment portfolio are needed to take this into account. Or changes in life require adjustments to existing contracts or the issuance of new ones.

Therefore, in many situations you will need to contact your financial advisor again to get help or support.

Well, let's take a look at what a personal financial advisor can do for you:

Conducts a financial inventory: income/expenses, assets/liabilities;
Will help determine and formalize (term, required amount) your financial goals;
Draw up a mathematically verified plan for achieving these goals;
Will open the necessary contracts to move towards goals;
Will support you along the way.

Thus, with the help of an advisor, chaotic handling of money will turn into a systematic movement towards the goals you need. And if this is important to you, let’s talk about which experts are on the market. So that you can accurately choose the right specialist for yourself.

3. What types of financial advisors are there?

In Russia, several terms are used for the profession that we discuss in the article. Personal financial advisor, family financial advisor or financial advisor for private individuals - these are all synonyms. There are also investment advisors who stand somewhat apart.

Let's take a closer look at all of them.

3.1 Employees of financial companies

Employees of many companies in the financial industry are called financial advisors. For example, bank employees, broker employees, or insurance company agents.

And you can contact any of them. However, in my opinion, this is not the best choice. Why?

Because each of these people is a specialist in their own, very specific segment of services. They know in great detail how an insurance contract, bank account or investment plan works.

However, before choosing a specific tool to use, you need:

Analysis of the current situation,
Goal setting,
Drawing up a plan to achieve goals.

First you need to make strategic decisions - what goals you want to achieve and how you intend to go. And only then do you go down to the tactical level and select specific financial instruments to implement your plan.

So first you need someone to help you do the necessary strategic planning. And then - he will recommend the best services available on the market to implement your financial plan.

In Russia, such specialists are usually called independent financial consultants (or advisors, abbreviated as NFS). In the foreign world they are called Independent Financial Adviser (IFA).

3.2 NFS

The distinctive thing about independent financial advisors is that these specialists are not employed by any financial organization - be it a broker, insurer or bank. From a legal point of view, many of them are individual entrepreneurs.

Having found out your current situation and long-term goals, NSF will develop a financial plan for achieving them. And then, in most cases, he will offer and open specific financial instruments for the implementation of this plan.

NSF has a cooperation agreement with many financial companies - both Russian and foreign. And on the basis of these agreements they can offer their customers a wide selection of different products.

And for clients, the independence of NFS is a great advantage. Why?

Because NFS does not have the task of selling any financial product to the client. His task is different - to offer the optimal solution for the client’s problems from those available on the market. And since NFS is a partner of many companies, it can offer the client a wide range of solutions.

In fact, the NFS is a kind of “financial hub”. Through this specialist, individuals gain access to the best services on the market and assistance in choosing the optimal solution.

On the contrary, a full-time employee of an organization, who is also a financial consultant, is often ready to offer only the products of his company. Which sharply narrows the range of possible solutions for the client.

However, in addition to financial advisors, the market also represents a special segment of specialists, which will be discussed below.

In December 2018, the Central Bank amended the federal law “On the Securities Market”. These changes are sometimes also referred to as the “Financial Advisers Act.”

As a result of these changes, new professional participants in the securities market emerged - investment advisors (IAs), or investment consultants.

And since then, only IPs have the right to give their clients individual investment recommendations. This is their key difference from other market participants.

In other words, only the IP has the right to tell the client: “you are investing in shares of XYZ company.” No one else has the right by law to give such recommendations to a client.

Why was it necessary to distinguish investment advisors from other participants in the financial consulting market?

The regulator is tired of complaints from individuals who were given recommendations on investing funds that were completely inappropriate for them by illiterate or greedy “advisers.” Indeed, as a result of these recommendations, many people lost serious money.

Before the advent of IP, it was a completely uncontrolled market. To restore order, the Central Bank created a separate class of professionals who have the right to give investment recommendations. And he began to strictly monitor the work of these professional participants, checking the compliance of the recommendations they offered with the needs and risk profile of clients.

Control over the operation of information systems by the Central Bank is a great help for private clients. But there is also a big fly in the ointment.

The regulatory requirements for those wishing to become an IP are so great that it is almost impossible for independent financial advisers to meet them. This has led to only large institutional players becoming investment advisors.

For example, at the time of writing this article, there were only 39 IPs listed in the unified register of investment advisers published on the Central Bank website:

Unified register of investment advisers on the website of the Central Bank of the Russian Federation

These are mainly the largest investment houses and banks in the country. Unfortunately, there are no independent financial advisors for individuals on this list.

So, you can choose your financial advisor from the following specialists:

Because many NSFs have experience in long-term financial planning. And they'll help you create a plan to achieve your important financial goals.

Moreover, most of these professionals have access to the best services available in the market. These are not only Russian, but also foreign financial products.

When you contact employees of financial companies, in most cases you will narrow down the range of available solutions for yourself. And this can negatively affect the achievement of your goals.

However, this raises a subtle issue. How does NFS, without being an investment advisor, form its client’s investment portfolio?

After all, ultimately, achieving any of your financial goals means accumulating a certain amount by the right time in the future. To create this savings, you need an investment portfolio. And in many ways, the task of a financial consultant is to help you competently form a personal investment portfolio.

Fortunately, there is no contradiction with the law here. NFS creates several model portfolios for clients with different risk profiles. Then, talking with an individual, he determines his attitude to risk. And offers him a model portfolio of the appropriate risk profile.

Thus, NFS does not provide its client with individual investment recommendations and does not violate current legislation. At the same time, offering its client a high-quality investment portfolio that helps a person achieve his goals.

3.5 Are there completely independent financial advisers?

A financial advisor for a private individual first carries out financial planning and then selects the optimal tools to implement the plan. And at the second stage, a conflict of interest is possible between the adviser and his client.

Because an unscrupulous consultant may recommend to a client those tools that are not suitable for the person. However, they will bring the advisor the maximum commission.

Can this conflict of interest be excluded? Theoretically, yes. In Western markets, there are specialists who provide exclusively personal financial planning services to individuals.

This is a Certified Financial Planner (CFP). Traditionally, these specialists are considered the most objective.

Because during the consultation process they only develop a financial plan and do not offer the client any financial products to implement this plan. These experts receive payment for their work only from their clients (fee only). And they do not receive commissions from financial companies that offer various products to individuals.

There are virtually no such specialists in Russia. Because today Russians do not yet realize the value of consulting an independent financial advisor. And they are not ready to pay for a personal financial planning service the price that would allow them to implement the fee only business model.

Therefore, financial advisors in Russia charge a small fee from the client for the consultation, and also receive commissions from the providers of the financial products that they open to implement their client's plan.

Eliminating possible conflicts of interest is a matter of professional ethics and integrity of the consultant. Which is also controlled by the professional community.

Because many current advisers are members of professional associations. Where can any client turn to if a financial advisor has given an incorrect recommendation or provided poor quality service. The Ethics Commission examines such disputes and determines the punishment for the financial adviser if he is guilty. To the point of expelling him from the professional community.

4. How to choose a financial advisor

You need a specialist with experience. And if a professional has been working in the market for a long time, he probably has one.

On the website, the advisor talks about himself and publishes his portfolio. These are professional articles, videos, various cases on solving the problems of his clients. Also on the site you will find diplomas and certificates confirming the training received by the financial advisor.

Explore the websites of different experts. Choose someone whose approach to financial planning and investing is consistent with your understanding of how it should be done.

In addition, you need a specialist with whom you feel comfortable psychologically. And whom you are ready to trust.

Because you will have to discuss very personal topics with him. Your plans for the future, your income and current financial situation. And when opening insurance contracts, also the state of your health and that of your beneficiaries. Therefore, you should be humanly comfortable communicating with this specialist.

Does an independent financial advisor have to have any kind of license? Not now.

Unless you intend to contact an investment advisor specifically. Then the company in which this specialist works must be listed in the official register on the Central Bank website.

However, let's return to NFS.

Although this is not required by law, many NSFs are members of various financial advisor associations:

And if the specialist you choose belongs to one of the associations, this is a good sign. Because within this community professional and ethical standards of service to individuals are regulated.

And then the expert you choose will definitely follow these standards. Thus, when communicating with this specialist, you as a client will receive high-quality service.

Does it matter where geographically the specialist you need works? In many cases it doesn't matter. Because many financial advisory services can now be obtained online, right down to issuing the contracts you need.

5. How NFS builds its work with clients

NFS work involves at least two meetings with the client. There are often more, especially if the client has large funds.

During the first meeting, we introduce ourselves, discuss the person's current situation, and his long-term financial goals. This initial stage is often called “fact finding.”

This step is absolutely necessary. Because without understanding the situation and tasks of the client, NFS cannot offer any solutions for the person. And at the end of the first meeting, we plan the next one.

They may differ in the time frame for solving problems, or the budget for investment. Or maybe by adjusting the size of the target.

Also, for various scenarios, NSF is preparing draft contracts that will solve the necessary problems. These calculations and projects are sent to the client electronically. So that he can study all these materials in detail for the upcoming meeting.

During the second meeting, NFS explains why the proposed solution will be optimal for the client. He also answers the client’s questions.

Perhaps, based on the results of this dialogue, additional calculations and projects will be prepared for the client, which will also then be discussed. And finally, if the final plan is approved by the client, the financial consultant moves on to the stage of its practical implementation.

This means that the financial adviser prepares a package of necessary documents for the issuance of agreed contracts. The client checks the documents and signs them.

NFS operation scheme

6. How much do NFS services cost?

Of course, each specialist independently sets prices for his services. I will try to give you only a general picture.

Before offering you any solution, the NSF must analyze the current situation, determine your goals, and draw up a plan to achieve them.

To complete this job, the expert will need to have at least two meetings with you. And in the interval between them, prepare financial calculations and draft contracts for you.

Now the price for this work on the market ranges from 0 (free) to approximately 30,000 rubles. Beginning consultants are willing to do this work for free in order to earn experience and reputation. Those who have been on the market for a long time, are recognizable and have experience are ready to do this only on a paid basis.

For the client, the result of the first stage will be a plan to achieve the goals he needs, and drafts of the necessary contracts to implement this plan. Further work towards the release of agreed contracts does not require payment from the client. Because for this work, NFS receives a commission from the company whose contract he opens for the person.

Soon the contracts a person needs begin to take effect, and he begins to move towards his goals. Further along this path, he may require two services from the advisor:

Portfolio management assistance. For example, regular reporting and rebalancing;
Answers to emerging questions.

The first service costs approximately 0.5%-1% of the portfolio value per year. The price of consultations on emerging issues depends on the cost of an hour of an expert, and ranges from 3,000 to 15,000 rubles per hour of work.

As you can see, NSF services have a very reasonable price. Which makes sense to pay - in order to take the shortest route to goals that are important to you, using the support of an expert along the way.

Professional financial advisors pay great attention to the safety of their clients' funds. This means that they will only offer you solutions from companies that are highly rated and located in reliable jurisdictions.

It is also important to understand that the advisor never takes client funds under management. Because for this activity you need a license of a professional participant in the securities market, who is called a manager.

NFS does not manage clients’ money - it only helps the client create the optimal path to their goals. And then choose the best tools on the market to implement this plan.

Also, NSF is not a party to the agreement under open contracts. For example, an advisor has issued an investment contract for a client. Then this is an agreement between two parties - the client who will accumulate funds, and the company that provides him with a service. NSF is not a party to this agreement.

In addition, the NSF is never a transit link for the transfer of funds from the client to the selected company, and vice versa. In the previous example, the client who opened the savings plan will transfer funds directly to the service provider. The consultant does not participate in settlements between the parties to the agreement.

Interaction between the client, NFS and the financial company

Thus, the client does not take on any additional risk when working with NFS. From the consultant he receives the optimal solution to his problems, and then enters into an agreement with the selected company. Next, he implements his plan by directly interacting with the selected company. This happens without the participation of an expert.

The problem for many people is that their financial lives are out of control. This often applies to those people who have high incomes.

Chaotic handling of money leads to the fact that life's time passes and important family tasks are not solved. Financially, you are stagnant. Missing the most precious thing for creating capital - time.

A financial advisor can help you turn chaos into order. You will determine your goals and cash flow for investment. And then get a step-by-step plan that will ensure your systematic movement towards your goal.

You will be surprised how much you can achieve by managing your money correctly. And carefully using the time you have.

Contact a financial advisor to take control of your financial life. And start moving towards goals that are important to you.

If you need help from a financial advisor, please send me a request:

Sincerely,

Vladimir Avdenin.