Having a stock advisor is simply an investment.
Just like when you need a dentist, a lawyer or a mechanic to help you with different areas, an advisor is essential to take advantage of your money. In addition, having a financial advisor can be cheaper than you think.
Did you know that the vast majority of Spaniards’ money in funds and pension plans is inexpensive and unprofitable products? Investing in an advisor, even if only to select cheap and efficient products, more than compensates for the cost.
Also… did you know that you have always paid for the ‘advice’ when you went to your bank office? In fact, since 2019 your entity must tell you how much money it has earned with you during the previous year by recommending specific products or services, thanks to the European MiFID II regulations.
What is a financial advisor and what are his functions?
But, if you need more clarity about what a financial advisor is and what he does, let’s see it so that you can solve all your doubts.
No one better to describe it than the European Association of Financial Advice and Planning. EFPA defines the financial advisor as “The person in charge of helping you. Someone with an exhaustive knowledge of finance and able to find the product that best suits your needs.” That is, they are looking for financial products for you.
But what activities do financial advisors carry out, and how do they help their clients? First, you have to understand that to offer financial advice; you have to be an investment services company. Finect is not, that’s why we don’t recommend products.
There may be large and tiny, one-person companies, but always a company approved by the CNMV. We can distinguish two types:
- A stock advisor at a bank or other financial institution establishes business relationships with customers and offers products adapted to their risk profile. When your remuneration, in this case, the bank’s remuneration, depends on the commissions that the product they propose to you has, it is an advisor that is not independent.
- On the other hand, there are independent financial advisors who do not charge commissions for the products they sell. Their remuneration is obtained from a fixed amount paid by the client they advise. Although the MiFID II regulation has increased the weight of this type of advisor, this type is usually less common since the public prefers to avoid making direct payment. But there are, and very good ones.
When the markets go up or down, financial advisors accompany you over time, help you achieve your goals and recommend financial products adjusted to your risk profile. They also tend to have certain qualities: solid monetary and fiscal wicker, but also a psychological basis because, as EFPA indicates, having empathy and knowing how to treat the client is essential for the work of an investment advisor.How much does it cost to have a stock advisor?
How much does a stock advisor charge?
There are different ways to modulate the payment that we collect below (payment per hour, per activity, fixed monthly fee…) and that will help you understand how much an advisor costs.
Advisors charge in different ways, and these are the most common:
- Independently billing us for guidance. The most typical is a variable fee, which depends on our assets and services but normally ranges from 0.15% for enormous fortunes to more than 1% for little investments. As mentioned, it is only occasionally the most common.
- Many advisors establish a fixed monthly payment, regardless of the shares they take, the assets or the capital gains. There are advisors who only charge you €20 a month and only if they generate profits.
- There are also cases of hourly charges for the time spent on advice or punctual service. The rates are variable, and you can find entities that charge 600 euros per dedicated hour; there are also lower rates (around 200 euros).
- Commission product sales. An advisor can recommend investment funds for other profiles based on the client’s profitability needs and risk tolerance. The fund’s management commission pays you.
It might range from 0.4% to 1.0% of your investment. 20 euros each month for a 30,000 euro investment. However, you are charged the value of your financial product and do not directly pay this “invisible” fee. The fund’s 1%–2% fee goes to your advisor.
- The commission for activity. The advisor sets a percentage for the profits that the investor obtains, thanks to the actions he recommends. The greater the benefit for the investor, the more the advisor will charge. Up to 15% on the total revaluation of the advised portfolio.
Many times it costs to pay for advice to invest, for that feeling that decisions can be made by ourselves or that we can follow the advice of the bank, a friend or a family member, which is theoretically accessible.
But the best thing we can do is invest in the advice of a professional in the sector.