What is the most fundamental financial advice you have ever received?

The purpose of The Financial Manifesto blog is to equip you with all the knowledge you need to effectively manage your personal finances. Here you will find fantastic advice on how to save money, how to invest, and how to earn more. We will be discussing the most important financial instruments you have access to. There will be a lot of free tips on personal finance management, financial planning, taxes, bills, mortgages, credit cards, loans and how to get rid of debt. You will also learn how to manage your personal finance as a couple, how to raise financially savvy kids, how to spend practically, and how to achieve financial freedom.

You will learn about the nature of money in general, and about personal finance management in particular.

My aim is:

To help you to understand the complexity of contemporary finance,

To show you how to use financial principles to your advantage,

To enable you to make the best possible financial decisions,

And to inspire you to take control of your money, to save money, to invest, to rule over money effectively, and set bold plans and goals,

To give you a good financial advice,

This very first article in the blog is will outline the most fundamental financial advice.

What is financial advice?

In social thinking, the term “financial advice” is somewhat  blurred and unclear

What is in fact financial brokerage and the classical sale of financial products has been called financial advice.

However, what is confused in common experience cannot be mistaken in professional approaches.

In this article, the difference between financial advice and financial brokerage will be explained. Before I wrote this article I had a long conversation on the topic with my friend and financial advisor Andrzej Fesnak. Andrzej is a European Financial Consultant who is committed to set the best standards for financial services.

To really understand the differences and similarities between financial advice and brokerage, let’s start with…philosophy. The concept of Yin and Yang comes from a Chinese school of thought. It assumes the existence of two primordial, opposing but also complementary forces. These forces exist in the whole universe. As you can see in the image below, Yang is an element of Yin – the black point on the white background. At the same time,Yin is an element of Yang – the white point on the black background. Without this principle of contrast, neither Yin nor Yang would exist. Both elements only exist because they are antagonistic, and they clash constantly.

But what does Chinese cosmology have in common with financial advice?

The parallel has a compelling explanation. In every process of financial brokerage (or in the process of selling financial products and services) there is an element of consultancy. And in each process of consultancy, there is an inevitable element of brokerage. In this invisible conflict between advice and selling, the winner is –of course – financial brokerage. There are so many more salespeople in finance than there are advisors.

What is significant is that a lot of salespeople call themselves advisors, yet no advisors call themselves brokers or salespeople.

There are quite a lot of international, and national, regulations when it comes to the occupational definitions of a financial advisor and a financial broker. To better understand this fundamental difference, you can view this website. 

There are at least three kinds of common understanding of financial advice.


The first is the most popular. A broker or salesperson will invariably call themselves an advisor or consultant, to increase their professional prestige. A consultant is someone who you can trust because he or she cares about your business. A broker, on the other hand, is in fact a salesperson: someone with monthly targets to hit. Thus, for them, a sales plan is somewhat more important than customer welfare.

The second understanding is similar to the classical meaning of giving financial advice. If a broker or salesperson specialises in one kind of financial product, such as mortgages or insurance, they may have an awesome, sophisticated knowledge of what they are selling. This means that they can be exceptionally helpful in solving some of the customer’s financial problems.

The third, and least popular, understanding is the most precise and accurate. A financial advisor is someone who prepares a financial plan for a customer. He or she doesn’t represent any financial commercial institution such as a bank, insurance company, or a credit company. A financial advisor is like a financial specialist, who may also be a coach and personal mentor. It is someone who represents their client’s interests and welfare.

A financial advisor prepares a financial plan for a customer.  This plan is a very comprehensive document describing all aspects of someone’s financial life. This document has a very complex structure and is quite long: it may run up to more than 100 pages.

The financial plan should contain:

An analysis of financial factors,

Planning and management of investment elements,

Planning and management of protective elements,

Planning and management of educational elements,

Planning and management of real estates,

Planning and management of debt,

Planning and management of health protection.

To put it simply:

A financial advisor checks the consequences of the past and current personal finance management of his client, and makes a note of their goals and dreams. The financial advisor gives these goals and dreams a financial dimension to secure their realisation 100%.

A financial advisor shows us how to realise these goals most cost-effectively, thanks to the use of financial instruments.

It may happen that a financial advisor helps a client to buy financial products and services. However, this is always as part of the wider financial plan.

To take away:

If someone introduces himself or herself as a financial advisor, it doesn’t mean that he or she is, in fact, a financial advisor. Financial advice is not about selling certain financial products. It is about preparing a comprehensive, bespoke financial plan. It is a mostly fee-based profession.

The ability to recognise whether you are dealing with a financial salesperson or a financial advisor is essential for your personal finance management.

Our blog aims to offer financial advice, not to sell you any financial products. Read The Financial Manifesto, sign it, comment on it, and share it. The more signatures, the bigger the chance for a real change, both in your life and in the lives of people around you.

Andrzej Manka

I am a financial advisor and the founder of The Financial Manifesto. I am AI & personal finance management specialist. If you want to contact me please send an email to joinus[at]thefinancialmanifesto.com. You can also attend our events in London, UK.

 

Andrzej Manka

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