A financial advisor can be a valuable member of a small business owner’s team of professional advisors. A skilled advisor can help manage both personal and business finances, providing insights into tax strategies, retirement planning, investments and more. But some advisors are better-suited to advising small business owners than others. To get maximum benefit, you’ll have to select the right one. Start your search by looking for one with experience working with small businesses, as they will understand the unique challenges you face. It’s also important to consider credentials, fees and personal style, especially with regard to communication.
If you’re ready to get financial help, SmartAsset’s free tool can match you with up to three vetted financial advisors who serve your area.
How a Financial Advisor Can Help Business Owners
One of the primary ways an advisor can assist is through cash flow management. By analyzing your business’s income and expenses, an advisor can help ensure stable cash flow, allowing for smooth operations and strategic growth. This is particularly important for businesses that experience seasonal fluctuations or have unpredictable revenue streams.
Tax planning is another area where a financial advisor can offer value. Business owners often face special tax challenges, including the need to maximize deductions, manage payroll taxes and plan for tax-efficient exits or succession. An advisor with experience in small business tax strategies can help you navigate these issues, potentially saving substantial amounts while ensuring compliance with tax laws.
Retirement planning for business owners can also be more complex than for regular employees. A financial advisor can help you set up and manage retirement accounts suitable for a business owner, such as a SEP IRA or a solo 401(k). They can also assist in planning for the day you stop working in the business. This might involve determining the business value and finding potential buyers or setting up a family succession plan.
Additionally, a financial advisor can guide you through risk management, helping you protect your business from unforeseen events. This includes advising on the right types and levels of insurance, such as liability, property and business-specific coverage such as key person insurance. By assessing the risks specific to your business, an advisor can recommend strategies to mitigate these risks and ensure long-term stability.
You may want to work with a financial advisor even before you begin your business. An advisor can assist a startup entrepreneur with creating a business plan, securing funding and modeling cash flow even before you open your doors.
What to Look for in a Financial Advisor
When selecting a financial advisor, focus on qualities and qualifications that align with your specific needs. Here are five general things to keep in mind:
- Experience with small businesses: Look for an advisor who has a proven track record of working with business owners. An advisor with relevant experience can provide tailored advice that supports both your business and personal financial goals.
- Credentials and expertise: Ensure that the advisor holds reputable certifications such as certified financial planner™ (CFP®) or chartered financial analyst (CFA). These credentials indicate a high level of expertise and commitment to ethical practices. Additionally, consider their educational background and any specialized training they have related to business finance.
- Transparent fee structure: It’s essential to understand how your advisor is compensated. Advisors may charge fees based on assets under management, hourly rates, or commissions on products they sell. Fee-only advisors, who are compensated solely by their clients, often provide more objective advice, as they have no financial incentive to recommend specific products.
- Personalized service: A good financial advisor should offer a customized approach to your financial planning. They should take the time to understand your business’s specific needs and challenges, as well as your personal financial goals. Look for someone who is willing to collaborate closely, offering solutions tailored to your unique situation.
- Strong communication skills: Your financial advisor should be someone who can explain complex financial concepts in clear, easy-to-understand language. They should be accessible, responsive to your questions and proactive in keeping you informed about your financial progress and any changes that could impact your strategy.
Where to Find a Financial Advisor
There are several effective methods to locate a qualified advisor who meets your specific needs. One place to look is online platforms designed to match you with advisors, such as SmartAsset. SmartAsset offers a free tool that connects you with up to three local financial advisors based on your financial situation and goals. This personalized approach helps ensure that you find an advisor who aligns with your needs.
Another method is to ask for recommendations from trusted sources. Friends, family, or colleagues who have had positive experiences with financial advisors can provide valuable insights and referrals. These personal recommendations often come with firsthand accounts of how the advisor operates, which can help you feel more confident in your choice.
You can also explore professional organizations, such as the National Association of Personal Financial Advisors (NAPFA) or the Certified Financial Planner Board of Standards (CFP Board). These organizations maintain directories of advisors who meet rigorous standards of education, experience and ethics. By using these directories, you can find advisors who are not only qualified but also committed to acting in your best interest.
Tips for Hiring a Financial Advisor
Hiring an advisor can significantly impact both your personal and business finances for better or for worse. To ensure you make the best choice, there are several tips to consider during the selection process.
First, verify the advisor’s credentials and experience. Look for advisors who hold certifications such as certified financial planner™ (CFP®) or chartered financial analyst (CFA). Additionally, ensure they have experience working with small business owners, as this will ensure they understand the unique financial challenges you face.
Second, understand the advisor’s fee structure. Make sure you are clear on how your advisor will be compensated and how that aligns with your financial goals.
Third, assess their communication style and availability. A good financial advisor should be someone who is accessible and can explain complex financial concepts in a way that you can easily understand. Regular communication is key to ensuring your financial plan remains aligned with your evolving goals and business needs.
Fourth, consider the advisor’s approach to financial planning. Some advisors may take a holistic approach, considering all aspects of your financial life, while others may focus on specific areas such as investments or retirement planning. Ensure their approach matches your needs and that they are willing to customize their services to fit your situation.
Finally, conduct a background check on potential advisors. Use tools like FINRA’s BrokerCheck or the SEC’s Investment Adviser Public Disclosure to verify the advisor’s professional history, including any disciplinary actions. This step is crucial in ensuring that the advisor you hire has a solid reputation and adheres to the highest ethical standards.
Bottom Line
Finding the right financial advisor as a small business owner can be a game-changer for both your personal and business finances. By seeking an advisor with experience in small business issues, strong credentials and a transparent fee structure, you can ensure that you’re getting expert advice tailored to your unique needs. It’s also important to choose someone whose communication style aligns with yours and who is committed to understanding the complexities of your business.
Financial Planning Tips for Business Owners
- Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you’re planning to sell your small business, the potential tax impact of such a move could be of major importance. This guide can help you understand the tax implications of selling a small business.
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