Navigating the intricate landscape of personal finance can be intimidating. That’s why pursuing professional guidance from a financial advisor is invaluable. But with so many advisors to choose from, selecting the right one isn’t easy.
I wrote this article to help you understand the key factors to consider when choosing a financial advisor and, importantly, how Mendoza Private Wealth exemplifies those considerations.
Are They a Full-Time Fiduciary?
Let’s start with one of the most important factors to consider.
To verify that your financial advisor puts your needs first, you must find out if they are a full-time fiduciary. A fiduciary advisor has a legal duty to prioritize your wishes over their own. This means they have to recommend products that fit your budget and align with your financial goals only.
But how can you be sure that a financial advisor you’re interviewing is always acting as a fiduciary? It’s an important distinction because part-time fiduciaries only need to act as a fiduciary when discussing a specific recommendation; it’s not required while selling products or investments.
To learn more, ask the advisor to put their fiduciary responsibilities in writing. Or better yet, ask them when they don’t act as a fiduciary.
What Are Their Credentials and Experience?
Here are more tips for digging into their credentials and experience.
Specifically, find out if they’re a Chartered Financial Analyst Charterholder or a CERTIFIED FINANCIAL PLANNER® professional. Either of these designations alone indicates broad financial knowledge, a research-based focus, and profound ethical principles. Together, they represent the industry’s most respected combination of financial planning and investment management designations. Also, take into account the advisor’s training, experience, and areas of specialization.
To give you an example of the type of qualifications you can peruse, I’ve earned numerous industry-specific designations to expand my knowledge base and showcase my dedication to the work I do for my clients.
These are the certifications I currently hold:
- Chartered Financial Analyst® (CFA®)
- CERTIFIED FINANCIAL PLANNER® ( CFP®)
- Certified Divorce Financial Analyst® (CDFA®)
- Chartered Financial Consultant® (ChFC®)
- Chartered Life Underwriter® (CLU®)
- Certification for Long-Term Care (CLTC®)
Essentially, being aware of the potential advisor’s qualifications can give you confidence in their ability to give you wise financial advice and help you pursue your long-term objectives.
How Are They Paid?
Understanding how your financial advisor is compensated is another crucial consideration when vetting financial advisors.
Basically, there are three primary ways that financial advisors get paid:
- Commission-based: Commission-based financial advisors make money on products they sell, whether mutual funds, insurance policies, or any other financial product. Unfortunately, this type of compensation structure is often plagued by conflict of interest because advisors can be tempted to recommend products based on higher commissions and not necessarily based on how the product aligns with the client’s needs.
- Fee-based: Like a commission-based structure, financial advisors can earn commissions from the sale of financial products. The difference with fee-based advisors is that they can also earn income from fees charged directly to the client.
- Fee-only: This is consistently the smart choice for discerning clients. A fee-only financial advisor is compensated solely by their clients. That means they’re paid with a flat fee, an hourly rate, or a percentage of the assets under management (AUM). Because the advisor’s income is not dependent on the sale of certain financial products, this straightforward fee structure helps promote greater alignment between the advisor’s recommendations and the client’s best interests.
Let’s look at my firm as an example of how this last fee-only pay structure works.
Mendoza Private Wealth operates on a straightforward fee model, charging a percentage based on the assets under our management and the complexity of your situation.
We prioritize transparency in all elements of our services, including our fee structure. Our compensation is directly tied to the trust our clients place in us to manage some or all of their liquid assets.
Are You Able to Access Performance Reporting for Your Assets?
Lastly, verify that the advisor you’re considering provides comprehensive, transparent performance reporting.
The ability to track the performance of your assets allows you to evaluate the effectiveness of your advisor’s financial planning strategies. Performance reports should include comprehensive details on the fees, asset allocation, and returns of your portfolio.
By having access to this information all in one place, you can hold your advisor accountable for their performance and make well-informed decisions about your financial future.
Typically, you can tell if an advisor lets you see performance reports by looking for a “client login” link on their website. If you find one, it usually means their clients have access to information about how their assets are performing.
Make the Right Choice
We know you have plenty of choices when it comes to finding a financial advisor. If you’re looking for a firm that keeps things straightforward and brings a wealth of expertise to the table, Mendoza Private Wealth is ready to work with you.
Let’s start the conversation—schedule your Fit Meeting here.
We look forward to connecting with you soon!
About Iván
Iván M. Mendoza is the Managing Principal and a Financial Advisor for Mendoza Private Wealth, a fee-only boutique, private wealth management practice with a focus on research, planning, and investment management. Working with clients in Miami and throughout South Florida, Iván provides investment and wealth planning advice to individuals and families and to their respective trusts, estates, foundations, endowments, and pension plans.
Iván began his career with Prudential in 1999, where he quickly advanced to Manager of Financial Services, overseeing a team of financial planners. In 2012, he joined Sanford C. Bernstein’s private client group as Vice President and Financial Advisor. Driven by his commitment to providing objective advice, he founded Mendoza Private Wealth in 2016. Iván holds multiple designations, including CFA®, CFP®, CDFA®, CLTC®, CLU®, and ChFC®, and is passionate about creating confidence in clients through sound financial planning and investment strategies.
A first-generation American of Peruvian heritage, Iván resides in Miami with his wife, Ana, and their two sons, Emiliano and Alessandro. He enjoys traveling, discovering new restaurants, all things science, World Cup soccer, and staying active through running and biking. An advocate for education, he draws inspiration from his grandfather, a former Minister of Education in Peru, and supports educational causes in his community. Iván is also a music enthusiast with a wide range of tastes, from jazz to reggae to heavy metal. To learn more about Iván, connect with him on LinkedIn.
