Small business owners are good at wearing a lot of hats. You’ve probably had to be CEO, CMO, HR manager, payroll processor and other key roles at some point in your career. There’s no doubt that you could also be your own small business financial advisor, if the need calls for it, but sometimes trying to play too many roles doesn’t do you or your business any favours.
“Running a business is a full-time job and more; being able to delegate these crucial tasks to a competent professional can allow owners to focus on growing their business to their full potential,” says Alex Klingelhoeffer, Advisor in Wealth Management at Exencial Wealth Advisors. .
Small business owners also tend to have complex financial situations, and the line between personal and business income and assets can be blurred, he says. “Working with an advisor with tax and legal expertise to complement their investment acumen can be a real added value for owners.” Here’s how to find the right financial advisor if you’re a small business owner.
How to Find a Financial Advisor for Small Business Owners
There are several ways to find a small business financial advisor. The first stop for many business owners is a search engine. A quick online search may be the easiest way to find advisors in your area, but consider online reviews as guides rather than rules.
“Online reviews can be skewed and are sometimes written by people who have never used the service and who do not live in the area (where) the business operates,” says Josh Simpson, vice president of operations and investment advisor at Lake Advisory Group.
A better place to get more reliable information is through personal referrals. Other business owners who have gone through the same vetting process for their own unique needs can be a great resource for advisor recommendations, Klingelhoeffer says. If you don’t know any small business owners in your area, consider joining a small business organization like your local Chamber of Commerce or SCORE, a national network of small business mentors offering free financial advice.
What to Look for in a Small Business Financial Advisor
“You really want to look for someone who has a good understanding of how to serve business owners versus other demographics like retirees and executives,” Klingelhoeffer says. “As a business owner, you probably don’t have the time or inclination to attend to every detail of your portfolio and sometimes the only time to log on will be at breakfast or in the evening.” Your advisor needs to understand the unique demands you face so they can serve you in a way that adds value to your business and your life, he says.
The advisor should also be invested in helping you grow your business, Simpson says. “As your business grows and needs more attention, are they prepared to provide the level of support needed? Whether that means adding staff, learning new skills, or any other kind of support, are they willing to grow with you for your benefit?”
Then there are also the criteria that everyone should look for in a financial advisor, whether or not you are a small business owner. First, confirm that the advisor is a fiduciary, Simpson says. Only fiduciary advisors are required to put your best interests before those of the advisor at all times.
Second, you want to make sure you feel comfortable talking to the advisor. “If you’re not comfortable talking to them, you’re not as likely to ask them questions as often as you would if you were,” Simpson said. “Just because they come highly recommended doesn’t mean they’re right for you. It’s nothing personal, sometimes personalities clash and you don’t have to work with someone you don’t want .”
The importance of integrating personal and business financial planning
Klingelhoeffer suggests asking the advisor about their experience integrating long-term business and tax planning into a personal financial plan. “If everything isn’t integrated, you’re going to miss some serious opportunities,” he says.
For example, Klingelhoeffer recently helped a client purchase a $700,000 tractor for his farm. Thanks to the Tax Cuts and Jobs Act, they were able to use accelerated asset depreciation and convert $500,000 of his pre-tax IRA to a Roth IRA. “Over the next 30 years, we predict that just one move will save her more than $1 million in taxes and result in an increase in family wealth of $2.7 million when her children inherit. assets,” Klingelhoeffer said.
“If you talk to an advisor about personal and professional finance challenges and they don’t have a great story about integrating those things, it’s probably time to move on,” he says.
Finally, start with the end in mind, says Klingelhoeffer. Succession planning is an integral part of small business financial planning and is necessary to maximize the long-term value of your business.
“An advisor experienced in developing and integrating an exit strategy into your personal financial plan can help you approach the next chapter of your life with eyes wide open, replacing the stress of what’s next with the wonder of what could happen,” he says.