We often encounter misunderstandings about the role of an advisor and how it differs from that of an introducer. In the following article, we will discuss the most common types of advisors we encounter and distinguish the roles as clearly as possible.
The advisor acting on mandate
The most common type of advisor we see is one who has been officially mandated to find investors and possibly set up a suitable financial instrument to achieve this. The end client is not from the industry and therefore depends on external help. The advisor signs the initial proposal from our cooperation partner, and any further contracts, such as a loan agreement, are completed with the beneficiary of the collected funds.
It may be that this advisor submits their own quotation with a fee surcharge to the end client based on the proposal received, or there is also the possibility of including a fee in the product, which can be paid to this advisor as a one-time or recurring payment. Normally, this is done within the framework of the advisor’s mandate.
At the client level, the role of this advisor can go even deeper. The advisor may be involved with the underlying projects and take on additional roles. However, these further roles are not relevant to the initial structuring of the financial product.
The pure consultant
Less often, we deal with advisors who neither have negotiation power nor act as initiators, but who have an official search mandate. In this case, the end client relies on an experienced advisor to make the right decisions.
This advisor sorts out a variety of options and is paid directly by the client for these preliminary assessments. It would also be possible to include fees for the advisor in a product if it is specifically requested by the end client.
The end client is only involved in the discussions during the second step, the final Q&A session with our cooperation partner. The end client then takes over the negotiations and also acts as the initiator.
Virtually anyone can be an introducer, as this does not require any background knowledge. In contrast to the roles described above, the introducer has absolutely no consultative role and should therefore only establish contact between two parties. In essence, the introducer knows a potential client who is currently looking for a specific solution and refers this client, without selling a product or solution, to a trusted solution provider.
Ideally, before a potential client is introduced to the solution provider, the general framework and thus the participation and the processes should be put in writing. If a successful deal is subsequently closed, the introducer gets their share of the pie without taking on the burden of accountability.
As far as the introduction is concerned, it can even be counterproductive if the introducer becomes more active and tries to sell a solution. Misinformation is difficult to correct later in the meeting with the solution expert and often leaves the potential client with an unsatisfactory impression. In the worst case, it can cause the client to go elsewhere.
If you know of a client who is seeking solutions, or you are an advisor yourself and have recently been mandated, please do not hesitate to contact us at firstname.lastname@example.org.