What Do I Look for in a Financial Advisor for Business Planning?
For many business owners, personal wealth and business wealth are closely connected. Your company may provide your income, represent a significant portion of your net worth, fund your retirement, and eventually become an asset you hope to sell or transfer. That makes choosing the right financial advisor especially important.
A financial advisor working with a business owner should understand more than investments. Ideally, they should help you see how your business, personal finances, taxes, retirement, and eventual exit strategy fit together.
Here are five things to look for.
1. Experience Working with Business Owners
Ask whether the advisor regularly works with entrepreneurs and privately held businesses. They should be comfortable discussing topics such as:
Business and personal cash flow
Retirement plans for owners and employees
Business succession
Buy-sell agreements
Key-person and other insurance needs
Preparing financially for a future business sale
Experience with situations similar to yours can be particularly valuable.
2. A Planning-First Approach
A good advisor should spend time understanding:
What your vision is for the business
Your personal financial goals
Why you may want to retire or exit, why now
How dependent your finances are on the company
What would happen financially if you couldn't work
How it would feel for your business to continue beyond your management of it
Your financial advisor should understand your complete financial picture.
3. Coordination With Your Other Professionals
Business planning rarely happens in isolation. Your financial advisor should be willing to collaborate with your:
CPA, EA, or tax professional
Estate planning attorney
Business attorney
Insurance professionals
Business valuation or transaction professionals
This becomes especially important when you're considering a business sale or ownership transition. A decision that makes sense from an investment perspective can have significant tax, legal, or estate planning consequences.
4. Help Separating Business Wealth from Personal Wealth
One risk a business owner can overlook is concentration risk. This means you might have years of income, capital, and personal wealth tied to your one company. Your advisor should help you understand that exposure and develop a personal financial strategy outside the business.
That could include building adequate cash reserves, investing for retirement, diversifying personal investments, managing debt, and preparing for the possibility that the business ultimately sells for more, or less, than expected.
5. Clear Fees and Clear Responsibilities
You should understand exactly how your advisor is compensated and what services you receive.
Ask:
How are you paid?
What will I pay annually?
Do you receive commissions or other compensation?
Who will actually manage my relationship?
How frequently will we review my plan?
What services are and are not included?
A good financial advisor should make these answers easy to understand.
Business Owner's Advisor Checklist
Before hiring a financial advisor, ask yourself:
☐ Do they regularly advise business owners?
☐ Do they understand both my business and personal goals?
☐ Will they coordinate with my CPA and attorney?
☐ Can they help me plan for succession or a future sale?
☐ Are their fees and services clearly explained?
☐ Do I understand potential conflicts of interest?
☐ Do I feel comfortable asking questions and challenging recommendations?
Think Beyond Investments
The right financial advisor for a business owner shouldn't simply answer, "What should I invest in?" They should help address the bigger question:
"How can I use the business I've built to create the financial future I want?"
Finding an advisor who understands both sides of that equation can help you make more coordinated decisions today while preparing for whatever comes next. If this is something you've thought about, don't wait to see if we can work to help you achieve your financial goals. If you would like to schedule a complimentary consultation, feel free to click our calendar link below.
This article is for general educational purposes and is not individualized for financial, investment, tax, legal, or business advice.
This commentary reflects the personal opinions, viewpoints and analyses of the Lightcap Financial Group, LLC employees providing such comments, and should not be regarded as a description of advisory services provided by Lightcap Financial Group, LLC or performance returns of any Lightcap Financial Group, LLC client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Lightcap Financial Group, LLC manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.