You probably think of a financial advisor as someone who can help you with your personal finances. And, of course, that’s true. But, an advisor can also do much more, everything from setting up company retirement plans to protecting company assets. “The right financial professional can be as important to you as your business partner,” says John Nersesian, managing director of Nuveen Investments in Chicago.
Generally, the services a financial advisor can provide fall into a few categories. There’s business valuation, determining what your business is worth, using several formulas; asset protection, helping to guard the company against potential risks; succession planning, including assisting with writing buy-sell agreements for partners; cash management, helping to get lines of credit or loans from banks; and retirement planning, setting up and managing 401(k) or other plans for employees. Plus, a knowledgeable advisor can even offer insights about strategy.
Still, it’s not easy finding someone who not only knows about investments, but also understands how to help small companies thrive and grow. These four key questions can help you make the right choice.
Question 1: Do you work with a lot of small business owners?
This one’s a deal breaker. Lots of advisors work with a variety of client segments. But, the professional who has mastered everything there is to know about, say, the details of corporate executives’ restricted stock options will probably not be as conversant in the subtleties of a small business. You need an advisor who deals largely with small company owners. While you’re at it, ask to speak to a few clients running businesses of your own size, in your particular industry, as well as others whose firms have grown while working with the advisor.
Question 2: What’s your investment philosophy?
Financial advisors range all over the map when it comes to their basic approach, from those who seek aggressive capital appreciation for wealthy clients to others more focused on wealth protection. There’s no right or wrong answer. It’s a matter of fit. “You want to make sure your philosophy is in alignment with theirs,” says Nersesian.
Question 3: How do you get paid?
Some advisors are fee-based, which generally means they get commissions for selling you mutual funds and the like, as well as a fee that’s a percentage of assets under management. Others are fee-only—they only receive a portion of assets under management. But, it gets more complicated. Some advisors, for example, may charge for producing a financial plan or bill you an additional fee for non-investment services. “If you bring your family in to talk about succession planning, you need to know if that’s included in the fee, if you’re going to be charged by the hour, or if there’s another cost involved,” says Nersesian. The bottom line: You want your advisor to be as open as possible about fees.
Question 4: What services do you offer?
Financial advisors don’t run cookie cutter operations. But, someone affiliated with, say, a major financial services firm will have access to different resources from an advisor running his or her own shop. The former, for example, may have an easier time helping you to get a loan.
At the same time, just because a person runs a boutique firm doesn’t mean you can’t get access to other services, as long as he or she has relationships with lawyers, accountants and other key professionals. “Make sure they have the resources to get the answers you need if they don’t have the information in-house,” says Damien Bertucelli, a financial advisor with Kleinman Bertucelli Investment Advisory Group of Raymond James & Associates. “No advisor knows everything.”