Any professional service costs money. And financial advice and wealth management is never free. Directly or indirectly, you pay commissions or fees. But is it worth paying a financial advisor?
In Spain, we are very reluctant to pay for intangible services. It is very difficult for us to see the added value of a professional. We understand better why a house painter charges you than why a lawyer’s bill. He goes into our culture.
But in the same way that when I have a cavity, I don’t try to do a filling on my own and go to the dentist, for important questions related to vital financial decisions, we should try to go to a professional and not try to figure things out by intuition, hearsay or what the brother-in-law on duty advises us.
Then there are people who are knowledgeable and could do it on their own but don’t have the time. Or simply as a matter of avoiding psychological bias, it is worth seeking professional financial advice and delegating.
In any of the above cases, the need to seek independent paid financial advice should leave us. Worth.
I, from what I see in the people I deal with and what some trusted friends tell me, there is a terrible need for financial advice. Most of them have no idea what to do with their money or are groping around in the dark. There are a lot of wrong preconceptions about investing and many prejudices. After some bad experiences, especially with banks, many become disillusioned and lose interest.
But I realize that the figure for the financial adviser in Spain is very much lacking. Well, what is really needed is a little more financial education in society, so that we learn to value the service and the advantage of having a trustworthy person who prevents us from making erroneous financial decisions.
Despite the loss of confidence of many people in the financial advice of banks, I know that many people do not look for alternatives and that they are resigned to what they have.
The truth is that independent financial advice in Spain has quite high entry costs to provide the service. This leads them to focus exclusively on assets greater than €300,000, which allows them to charge sufficient fees to cover all those regulatory and regulatory costs.
So in the end there is a gray area, where the vast majority are and we have no choice but to settle for free financial advice from financial institutions. It is neither free nor independent.
Because as much as it is said, financial advice from banks suffers from terrible conflicts of interest. They do not recommend the products that are most convenient for you, but rather those that leave the entity with the most commissions, nor are the hidden costs turning out to be low. Well, with the new banking regulations, banks are having to show the client how much they earn with their investment services.
And although there are still those who think that mutual funds do not have commissions, a few are already beginning to wake up, looking for fairer and less abusive alternatives, such as index funds or ETFs. But unfortunately, they are the least.
Commercial banking plays with the knowledge it has of the customer. And of that confidence, that is generated with the day-to-day relationship and the little things that happen to you and that solve you. To have you more and more tied and kidnapped. And that in the end, you end up shrugging your shoulders and saying, well, who cares. All banks are the same. And in mine is so-and-so, who knows my whole life and miracles and that of my family. And that is enough for us.
And advice is given in bank offices. But not the ones that best suit you always. And investment recommendations are made and there is financial advice. But with their own product and never be independent. And all that, although you don’t want to see it, costs you a lot of money. But very, very.
But then it turns out that you scream in the sky for a maintenance fee of €15 and €1,000 per year at the rate of 2% management fee and deposit that your bank earns with your €50,000 in investment funds or with your portfolio of delegated management funds. And those what?
The feeling it gives me is that despite digitization and everything that is changing banking, we continue and will continue to need people to help us make the important decisions of our life cycle. We will continue to need financial advice. And having a person close to you that you fully trust for these things, the truth is that it is priceless. But we have to understand that, in order to have the best advice, you have to pay for it explicitly and it has to be a fair price.
The most important reason why you surely need a financial advisor is so that you have someone close by who can give you the calm you need when things get complicated. To help you think about the future, and draw up tailored plans to achieve your goals.
But I see a problem in the costs and in the lack of transparency and independence. To think that we are going to be able to get low-cost online financial advice is a bit utopian. Because having at your disposal a trained and experienced gentleman who knows what he says is always going to be expensive.
We have internet. And it is true that there are very good and very useful things published in blogs like this one. But I will never be able to make you a personalized and tailored recommendation. And the moment you let go of independent financial advice and go on your own, it is easy that sooner or later you end up wrong. Therefore, long live financial advice, because it is really worth it.