Financial advice is a profession that is heavily regulated in the European Union (EU). There are two basic modalities to practice the profession of financial adviser, the first is through association with a financial institution and the second through the formation of a company. What leads to being a dependent or independent financial advisor respectively.
In both situations, the adviser needs exhaustive and recognizable financial training, which provides security and authority to clients, companies and administrations. In my case, I recently obtained the European Financial Advisor (EFA) accreditation from the European Financial Planning Association (EFPA) of Spain. EFPA accredits and certifies the knowledge, skills and aptitudes of professionals dedicated to financial-personal planning and advice, ensuring the level of knowledge and continuous training of its associates, and ensuring professional ethical conduct through compliance with the Code of Ethics, among other goals.
The EFA accreditation complements my financial training, particularly consolidating my Master’s Degree in Financial Advice and Asset Management from the Universitat de Barcelona and OBS Business School. But my financial training does not end there, my Master in Business Administration (MBA) although it was general, as far as possible, I opted for finance subjects with a final project in econometrics (VIX as Variable Predictor of Stock Market Return). And even more, my Doctorate in Business Administration (DBA), which I am currently studying and 50% completed, consists 100% on finance, specifically on the study of the prices of financial products and algorithmic trading.
However, the advisor’s training is strictly necessary for the exercise of financial advice, but it is not sufficient, since, as it is a highly regulated industry, legal and regulatory requirements are very important.
My main profession is as an engineering director, and I recently explored the positivity of practicing as a financial advisor as a sideline. My primary goal was to create an independent financial advisory firm and open a Registered Financial Advisor account with InteractiveBrokers (IB).
IB is a broker established almost 50 years ago, with a very complete platform and minimal operating costs. Likewise, they are obliged to follow the legal requirements relevant to the EU. After numerous communications with IB, the key point to creating a registered financial advisor account is obtaining a financial license for a business, and this proved to be a major impediment.
There are numerous financial licenses, which are assigned to companies, the most complete and with the highest requirements being those granted to banks and credit institutions, going down in content and requirements, until reaching financial advisors or fund managers. In any case, the licenses are granted by the central banks or regulatory entities of the EU countries where the professional activity is exercised.
I studied various European jurisdictions, including Ireland, Estonia, Lithuania, Spain, Germany and Hungary. The costs associated with a financial license are two. On the one hand, to obtain the license, and on the other to maintain it. In my case, the costs were too high to justify the creation of the company, especially the maintenance costs. In conclusion, I rejected the option of creating a financial advisory company, and consequently establishing myself as an independent financial advisor.
There is a second option, it consists of joining a bank or company, and working as a dependent financial advisor. Although I have not studied this option in depth, it does not seem very interesting to me. Being a dependent financial advisor implies that you are obliged to offer specific financial products of the company you represent. Therefore, you enter into a conflict of interest, because you do not offer the client the best option on the market, but rather the best option available from the company you represent. In conclusion, despite having extensive training and experience in finance and financial advice, it is unfeasible to work as an independent financial advisor. I don’t rule out the option completely, but for now it’s not viable.