What is Financial Agent? Definition of Financial Agent, Financial Agent Meaning and Concept

A financial agent is a natural or legal person who performs an advisory service related to finance and investment. Financial agents must be qualified and, generally, work for a bank or similar entity.

When a person wants to carry out an investment and needs advice in this regard, he can contact a financial agent to help him. Financial agents are highly qualified natural or legal persons in terms of financial products and the risks they entail.

Also, they are used to dealing with clients who do not have great investment knowledge, so their explanations are usually straightforward and understandable to most people.

Its main objective is to study your client and offer them the financial products that best suit what they are looking for. The products offered will depend on the amount of risk you want to assume or the time horizon of the investment.

The financial agent must be certified and possess the training required by the MiFID II regulations, the European regulations that regulate the conditions of authorization and operation of companies that offer investment services.

Functions of a financial agent

Financial agents have the following functions with their clients:

  • Compilation and study of the information required by a financial agent. We explain it to you in the next section.
  • Analysis of financial products that adapt to the preferences and interests of the investor.
  • Create an investment strategy for the client that is followed throughout the process.
  • Track how the portfolio of financial assets is evolving to draw conclusions or modify the investment strategy if necessary.
  • Being in contact with the client on a frequent basis to resolve any doubts he may have, or sell him the assets he requests.

In addition to this, depending on the entity for which said financial agent works, he must comply with certain sales or tasks to achieve the objectives or requirements of his job.

What information does a financial agent need?

For a financial agent to be able to advise correctly, it is necessary for the owner of the capital to provide certain information. This data will allow you to identify which are the ideal financial assets for your client and it will be easier to obtain a certain return.

When we approach a financial agent, it is important to inform them of the following aspects:

  • First of all, it is necessary to know the capital to be invested. Certain financial products require a minimum capital to be able to acquire them.
  • Second we have the time horizon. Thus, the investment strategy can vary considerably depending on when it is stipulated to recover the capital contributed. There are financial products that can offer greater profitability in the short term, but are not interesting for the long term. On the other hand, there are strategies such as investment in value or in dividends that require a longer time horizon to be profitable.
  • The risk you want to take is also a decisive factor. This decision makes a great screening among the financial products that the financial agent will recommend to the investor. When you want to take low risks with little return, fixed income products are usually the most successful. On the other hand, when you seek to obtain a higher rate of return, it will be necessary to take greater risks.
  • The investor's training in financial markets is very valuable information for the financial agent. It is not the same to advise qualified people in this regard than to an investor who does not have any information about it, but wants to put his money to work. The more training, the more aware you will be of the risks and the functioning of the market, making advice easier.
  • Last but not least, we have the objectives that the investor has. It is the result of the aspects mentioned above. It is very valuable information for the financial agent to know where the investor wants to go and through which “paths”.

Difference between financial agent and EAFI

Before explaining the differences, you need to know that EAFIs are financial advisory companies, hence their acronym. As we have mentioned previously, financial agents generally work for banks that market financial products.

In this sense, the EAFIs have the sole objective of advising the investor, without this entailing the sale of any financial asset. Thus, they are natural or legal persons who are authorized by the State to provide these services.

The collection of their services is done through fees, as when the services of a lawyer or an economist are hired. In the case of the financial agent, they provide free advice that is financially rewarded with a commission for the sale of the financial products offered.

Finally, the EAFIs are independent in their advice because they do not market any product. Therefore, the recommendations made to the investor will be transparent and without any interest other than that the client obtain the highest possible return and be satisfied.

In conclusion, a financial agent is a natural or legal person who normally acts on behalf of a financial institution. It offers products to its customers at no cost and its income comes from the commissions obtained by selling them.