Small business owners are good at wearing lots of hats. You’ve likely had to be the CEO, marketing director, HR manager, payroll processor and other key roles at some point in your career. No doubt you could be your own small business financial advisor, too, if the need called for it, but sometimes trying to play too many roles does a disservice to yourself and your business.
“Running a business is a full-time job and then some; being able to delegate these crucial tasks to a competent professional can allow owners to focus on growing their business to their fullest potential,” says Alex Klingelhoeffer, wealth advisor 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 blurry, he says. “Working with an advisor with tax and legal expertise to complement their investing acumen can be a real value add 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 can be the easiest way to find advisors in your area, but treat online reviews as guides rather than rules.
“Online reviews can be skewed and are sometimes written by people who never used the service and don’t live in the area (where) the business operates,” says Josh Simpson, vice president of operations and investment adviser with 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 an excellent 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 nationwide 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 get wrapped up in every detail of your portfolio and sometimes the only time to connect is going to be over breakfast or in the evening.” Your advisor should 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 requires more attention, are they willing to provide the necessary level of support? Whether that means adding more staff, learning new skills or any other type of support, are they willing to grow with you for your benefit?”
Then there are also the criteria everyone should look for in a financial advisor, whether or not you’re a small business owner. First, confirm the advisor is a fiduciary, Simpson says. Only fiduciary advisors are required to put your best interests before the advisor’s own at all times.
Second, you want to make sure you feel comfortable talking to the advisor. “If you are not comfortable speaking with them, then you are not as likely to bounce questions off them as often as you would if you were,” Simpson says. “Just because they come highly recommended doesn’t mean they are the right fit for you. It’s nothing personal, sometimes personalities clash and you don’t have to work with anyone that you don’t want to.”
The Importance of Integrating Personal and Business Financial Planning
Klingelhoeffer suggests asking the advisor what experience he or she has in integrating long-term business and tax planning into a personal financial plan. “If everything isn’t integrated, you are going to miss out on some serious opportunities,” he says.
For example, Klingelhoeffer recently helped a client buy a $700,000 tractor for his farm. Thanks to the Tax Cuts and Jobs Act, they were able to use accelerated depreciation on the asset and convert $500,000 of his pretax IRA to a Roth IRA. “Over the next 30 years, we project that single move will save him more than a million dollars in taxes and result in $2.7 million in greater family wealth by the time his kids inherit the assets,” Klingelhoeffer says.
“If you are speaking with an advisor about challenges with personal and business finances and they don’t have a great anecdote about integrating these elements, it’s probably time to move on,” he says.
Lastly, begin with the end in mind, Klingelhoeffer says. Succession planning is an integral part of small business financial planning and necessary to maximize your business’ long-term value.
“An advisor with experience crafting and integrating an exit strategy into your personal financial plan can help you enter the next chapter of your life with eyes wide open, replacing the stress of what’s next with the wonder of what could be,” he says.