What to Look for in a Good Financial Advisor: A Guide by Mundo

Since investments are such an important part of our weekly content, we've decided to dedicate an article to the topic. Particularly, this article focuses on those people who take care of your portfolio and to whom you trust the security of your assets.

Today, Mundo presents guidance on what to look for in a good financial advisor. It's worth noting that this article is written by the Mundo editorial team according to our own opinion and experience. Hence, this article can be taken as a guide or as a source for ideas but not as financial research or professional advice.

Financial Advisors and Why Are They Important

In our belief, ideally each person should look after their own portfolio, but this is exactly that: an ideal. In the real world, financial advisors are necessary because the investment world requires a great deal of studying and research.

The more you study, the more you understand the markets, their trends and behaviors through time, and hence their possible shifts in the near future or the long term. It's also vital to understand the difference between types of assets, where they fit best, what purposes they serve, and also their history and how they may behave.

Besides studying, there's a whole other aspect which is research, and this must be conducted on a daily basis. The investors, as well as the financial advisors, need to be looking at what happens in the market and in the news every day.

To sum up, the reality is that not all investors have this amount of time, in fact, they rarely have it. So, they need financial advisors to provide input, create strategies and even implement them.

What to Look for in a Good Financial Advisor

Ask for Certifications

First, it's necessary to clarify one thing: having advanced degrees and a load of certifications, even if from the best universities and institutions, doesn't automatically make anyone a good financial advisor. Therefore, this shouldn't be the main evaluation parameter. The presence of higher education degrees and certifications speaks of a person's commitment to his or her career, and this is something we can factor in when looking for the best financial advisors.

The Reputability of Financial Advisors Is Key

When discussing what to look for in a good financial advisor, reputation can't be overlooked. A long career of success and happy clients is definitely something we should see as a determinant factor. Does that mean we can't give new professionals an opportunity? Absolutely, but in that case, a good idea might be choosing financial advisors that had been referred by a trusted party. Another option is to trust them with a small part of the portfolio at first.

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Honesty Is Crucial in Financial Advisors

You want a person who tells you things exactly as they are, even if it means being open about the mistakes they've made. Honesty is the foundation of trust, and it can't be missing from the evaluation parameters. There is an edge of the law that contemplates this, but we will see this further down in the article. 

Knowledge

Naturally, what we described in the first paragraph must be routine work for investment professionals. The more your financial advisors know and the more effort they dedicate to understanding the current events going on in the markets, the better.

The Best Financial Advisors Can Explain Their Strategies

The ability to communicate with others is a soft skill, but it's a vital one when you're wondering what to look for in a good financial advisor. We dare to say that even more important than previous knowledge is the advisor's ability to understand your goals and set up a tailored strategy.

Then it's crucial that financial advisors are able to explain these strategies and approaches to you in a way that you can understand them. At the end of the day, the decisions regarding your portfolio are yours and yours only, so one of the key functions of your advisor will be explaining things optimally.

Understanding Taxation

Ideally, the person who runs your strategy should be a tax expert or work closely with one. Paying unnecessary taxes may cause a portfolio to lose value. Also, some investments provide more returns and faster, but they are taxed at a higher rate or sooner, which means a long-term approach will be more profitable. Sometimes taxation depends on how long you have held the asset in your possession, so this should certainly be factored in. 

Choosing the Best Fiduciary Financial Advisor

Who is a fiduciary advisor? First, we need to establish what is a fiduciary. This status is quite recent, and it applies to broker dealers, having been exercised since 2020 when the Regulation BI from the Securities and Exchange Commission went into effect.

The term “fiduciary” not only applies to financial advisors but also lawyers or realtors. This is a person legally bound to act in the client's best interest. 

It's worth noting that financial advice goes beyond the portfolio, including insurance policies, retirement plans, and sometimes banking and company incorporation. The law that regulates fiduciaries prevents financial advisors from recommending strategies that will benefit them more than they would the client. This can be because they get a higher commission or because a certain type of asset is more convenient for them, an investment pool, or their other clients.

Thus, when looking for the best advisor we should probably be looking for the best fiduciary financial advisor. They are obliged by two principles: duty of care, which means they must present all the information openly, and duty of loyalty, under which they must recommend the path that better serves the client.

Disclaimer: this article is mainly informative, and it's not based on formal financial research or formal financial studies. Therefore, this article should not be taken as financial, investment or tax advice. The reader is responsible for his or her own decisions and for obtaining professional consultation. Mundo and the Mundo team are not liable for those decisions or the conclusions that may be drawn from this article.

Final Thoughts on What to Look for in a Good Financial Advisor 

At the end of the day, if you can't manage your investments on your own, you'll have to find financial advisors that you trust. You can look for the best fiduciary financial advisor in your area, and you'll know you'll be supported by the law.

Once you find the right person, at Mundo we can help you open bank accounts abroad, establish companies, buy real estate, or relocate through citizenship and residency by investment.

We have a team of experts, lawyers, and advisors across different countries and a number of trusted colleagues and partners that help us implement these tools safely and responsibly.

Contact us now