Financial Planning

How to choose a financial adviser in Luxembourg

11th June 2020

The Author: Vijay Kumar

When it comes to choosing a financial adviser, there are several important considerations to take into account, namely whether they’re the right ‘fit’ for you and your needs. To give the best advice, a financial adviser must collect enough information from you to make a personal recommendation to help meet your goals. It makes sense therefore that you can trust them enough to answer their questions.

But how do you start to trust someone you don’t know?

Identifying dependable financial advisers in Luxembourg

It’s wise to educate yourself so you can ask the right questions to identify dependable financial advisers. You want to determine how they operate, communicate and whether or not they have your best interests at heart.

With that in mind, we believe the following are just some key areas to consider:

  • Values – anyone with integrity should be able to list their values. You want to hire a professional who is going to work with your interests at heart, not a salesperson focused on selling you a product. Are they upfront about fees and commission? Clear values and fee transparency are great indicators that you can trust a financial adviser.
  • Payment terms – much like any service provider, financial advisers expect to be paid for what they do. You want to be clear on how they are paid for those services and any transactional business they conduct on your behalf.
    Service provision – professional and trustworthy advisers communicate clearly when it comes to how they provide their services and what you can expect when working with them. You want to know about forward-planning meetings and be updated on how they’re working for you, not be simply added to a newsletter list.
  • Bedside manner – you want someone who is honest and direct when it comes to financial planning, but you also need that person to explain technical matters in a way that makes sense. You want them to share their knowledge so you can understand everything and make informed decisions.
  • Your best interests at heart – you want an adviser who will give the best advice for your situation. If they don’t ask questions to get to know you and what you want from the relationship, they don’t have a right to manage your money.

Asking, and being asked, the right questions – a trustworthy financial adviser should be able to answer your questions directly and clearly articulate the things we’ve already mentioned, like their values, payment terms and how they will work with you.

We’ve elaborated on the above points in our post Should you trust a financial adviser?

Do they have the right qualifications?

This may seem obvious but it’s important to know if they have the necessary qualifications to give sound financial advice, tailored to your circumstances.

The most comprehensive advice is provided by Independent Financial Advisers (IFAs). The benefits to you of working with a qualified and experienced IFA include:

Protection – you want to be sure there are systems and controls in place to prevent your financial adviser from simply disappearing.
Qualified advice – while things have improved in recent years, there are still a number of unqualified advisers operating internationally. Always check credentials. Fair treatment – there are strict rules in place for advisers to follow. This ensures the advice they provide is appropriate to you and is fair.
Comprehensive complaints handling – if you receive poor advice or believe you’ve been unfairly sold a product you have the right to seek redress. Regulated financial advisers must follow strict processes for handling complaints.

Are they experts in their subject matter?

While most financial advisers offer advice on a wide variety of topics, some specialise in certain areas such as international pension transfers or retirement planning.

If you’re seeking particular advice, ensure your financial adviser has knowledge and experience in that area. You wouldn’t want someone handling your pension transfer if they have never done it before.

Ideally, you want someone who understands the tax situation in Luxembourg and the advantages of the different investment types. If you are an expat with a complex work and pensions history for example it helps to work alongside an adviser with good international experience who can identify international investment opportunities and accounts. You’ve worked hard to accumulate your wealth so it is important to have someone who understands the best ways to protect it internationally.

Do they have a good online reputation?

You need social proof that a financial adviser has delivered the service you’re looking for and they don’t have a bad reputation. Can you find any customer testimonials online that will help verify an adviser’s experience? Reviewing case studies will help to see how they have helped expats like yourself.

When determining a potential adviser’s reputation, research whether they work with reputable partners when proposing investments. Financial advisers who work with independent investment specialists deliver better and more tailored client outcomes.

Are they regulated to operate locally?

You want to be sure the adviser you choose is a licensed financial professional operating according to local regulations. This will further safeguard you and your interests.

In Luxembourg, the majority of IFAs are regulated by the Commissariat aux Assurances or CAA, the regulator for all insurance business in Luxembourg. In order for an IFA to promote, sell and give advice on insurance products, registration with the CAA is mandatory.

Check that the financial adviser you wish to work with is regulated by the CAA for business they conduct and products they sell in Luxembourg.

If an IFA is not registered with the CAA, they should have a MiFID II licence. MiFID II (Markets in Financial Instruments Directive) is the European directive central to how financial products are provided and marketed across the European Union.

Are they staying up to date with industry best practice?

It’s essential that IFAs keep their skills and knowledge up to date to ensure you receive the latest and most appropriate advice catering to your needs.

When it comes to staying up to date with regulatory information, advice and consumer protection practices, some financial advisory firms are members of the Federation of European Independent Financial Advisers (FEIFA).

The benefits of FEIFA membership to you include peace of mind, knowing that you will receive current, relevant and regulated financial planning knowledge and expertise.

Be prepared and ask questions

We touched on it earlier but it’s worth repeating: regardless of the advice or financial service you’re seeking, always be prepared with questions to ask a financial adviser.

Finally, the most important thing to remember when it comes to choosing a financial adviser is that you are in control.