Well advised

Good advice fulfills the two quality criteria of competence and independence.

Most people seek advice on money matters from their trusted banker or insurance advisor. But does this lead to the best possible result?

Advice from the bank or insurance company is often provided free of charge or at low-threshold costs. Do not let this blind you. The actual aim of the advice is for you to take out investment, pension and/or insurance products with the bank or insurance company. The advisory service is indirectly financed by the fees for these products. The competence of the advisor may be guaranteed, but he is not independent. When providing advice, he is subject to the false incentives, margins and fees of his employer instead of optimizing your financial interests.

Independent financial advisors or financial planners offer an alternative to banks or insurance companies. But here, too, it is important to ensure that the advisor does not receive any compensation – so-called «kickbacks» – from the recommended product providers for their product recommendations. If such kickbacks are involved, the independence of the independent advisor is also over. One indication of an advisor’s independence is the fees they charge from the outset for their advice. He has to charge these as they are his only source of income. To be on the safe side, insist on a clause in the advisory contract stating that your advisor will not receive any additional compensation from third-party providers in addition to the advisory fee you receive, or that they must pass this on to you.

The option of being advised by your own pension fund is exciting. Advice from the pension fund fulfills the independence criterion. The extent to which the pension fund’s advisory competence is guaranteed or whether the pension fund is willing to answer your questions must be clarified on a pension fund-specific basis. Large pension funds such as the Civil Service Insurance Fund of the Canton of Zurich (BVK) or the Federal Pension Fund (PUBLICA) are currently leading the way and gradually expanding their information and advice services for their policyholders. You can benefit from this.