Financial Advisor for Business Owners: Why Every Successful Entrepreneur Needs One

financial advisor for business owners

If you’re a successful business owner, congratulations; you’ve already beaten significant odds. According to a report by the U.S. Small Business Administration, just over 45% of small businesses survive the first five years. By the tenth year, only 1 in 3 firms remain.

If you’ve made it past those milestones, you are probably enjoying your success. But that success usually comes with a cost: more time focusing on growing the business means less time to focus on your personal finances. Your business balance sheet may be looking good, but how about your own finances? If your business success went away tomorrow, would you still be able to live the way you to want to?

As long as your business and your life proceed as planned, you may never have to wonder, of course. But as we all know, there are many things in life that are far outside of our control. And some of these things can impact your financial well-being:

  • Recession or business downturn
  • Loss of a key contract
  • Lawsuit against your business or you
  • Divorce
  • Death or disability of you or your spouse
Maybe these events will never happen, or maybe something does happen but it blows over without long-term financial repercussions. However, do you want to gamble on maybes? Probably not. After all, we’ve all run into individuals who had to seriously downgrade their lifestyles after a divorce, lawsuit, or business failure.
That’s where a quality financial advisor can help you. They can look ahead and help you insulate yourself financially against common threats. So if those things happen, even though you will be impacted in some way, you have a better chance of emerging with fewer losses.
But the key to all of this is you have to prepare sooner rather than later. And that’s where a good financial advisor can make the difference. He or she can help you make progress on these big picture plans while you focus on your business.

Benefit from a Different Financial Perspective

As a small business owner, you’re likely confident and optimistic, with a healthy appetite for risk. These traits no doubt are a key to your success and have helped you grow your business. However, handling your finances with a similar outlook may actually be destructive. It may lead you to take more risk than you should and not adequately prepare for the future.

Statistics show this is quite common. A report by BMO Wealth Management surveying 400 small business owners shows just how unprepared many people are. Here are some unnerving findings from that survey:

  • 75% of those surveyed had less than $100,000 saved for retirement.
  • Those between the ages of 45 and 64 were in slightly better shape, but still only 32% had more than $100,000 saved for retirement.
  • Fewer than 11% had over $500,000 saved for retirement.
Most of the business owners surveyed seemed to assume that their current business would somehow be sufficient to fund their entire future in retirement. Of course, here’s the problem: if that business falters or fails, your future lifestyle is at risk.
Since most entrepreneurs are confident and naturally optimistic, it is easy to assume that the fate of your business is totally within your control. But don’t forget, there are things that can happen which we cannot influence: natural disasters, the economy, health issues, and more. Even lawsuits that are totally without merit can have a devastating impact on your business.
The fact is this: your lifestyle in retirement may very well be at risk if you cannot sell your business when you want to, or for a price that will generate enough to support you for the rest of your life.

Risky Business

Worse, even business owners who do save regularly often tend to gravitate toward investments they understand (i.e., those in their own industry).
That’s a reasonable premise, but if your industry takes an unexpected downturn, you could be facing a double whammy: your own business could falter while your investments also drop. Think back to the dot.com crash: those involved in technology probably sustained some financial harm. But if they also were invested personally in technology stocks and owned a house in the area, their losses dramatically increased.

What Can Hiring a Financial Advisor Do For You?

A quality financial advisor who is experienced with working with business owners can help you diversify your personal finances away from your business, so you can better withstand economic shocks. They can also provide you with an extremely critical outside perspective:
  • They can provide an objective look at your personal finances apart from your business.
  • They can help you find ways to reduce your income tax burden, both today and in the future.
  • They can help you manage your investments with discipline to help you achieve conservative and reliable growth (and avoid expensive mistakes).
  • They can help you create a financial plan to fund your retirement and achieve your personal goals.
  • They can help you with estate planning to help shield your personal assets from your business, in case of any unexpected litigation.
Business owners who have a good financial advisor also find other benefits to having this professional by their side. Once the advisor gets to know your personal situation, you’ll have a valued sounding board for all types of big financial decisions. If you’ve got shareholders or business partners, this can be extremely helpful in objectively working through problems or concerns.
You’ll also have someone who can help you analyze opportunities. For example, if you receive an offer to buy your business or merge with another firm, your advisor can help you think through the pros and cons, purely from the perspective of what would be best for you. If you decide to pursue it, your advisor can also help you structure the deal to help you minimize taxes, then coordinate with your accountant and attorney.

Choosing the Right Financial Advisor

Of course, most things in life come with qualifiers. A financial advisor can be a key professional to help you achieve your personal goals—but not all financial advisors are the same. Choose right, and you’ll have a critical perspective to help you avoid financial mistakes and better prepare for the future. Choose wrong, and you may receive product recommendations (i.e., sales pitches) veiled as “advice” which may not be in your best interests.
Here are some tips to help you find the best advisors who can help you achieve your goals:
  • Look for firms that have stood the test of time and have been in business for decades, not just several years. Economic cycles can last a long time, and you need a firm with experience helping clients succeed in both good and bad markets.
  • Only consider financial advisors that operate as your legal fiduciary. This means they are required by law to put your interests before theirs. This is an important distinction because some financial professionals may use the same title (financial advisor, financial planner, or wealth manager), but not actually act as your fiduciary.
  • Look for financial advisors that are completely independent. An independent advisor with no ties to product companies is free to recommend products that are best suited to your needs.
  • You want solid financial planning and retirement planning, so it’s recommended to find an advisor who is a CERTIFIED FINANCIAL PLANNER™ professional (or CFP®). To earn the CFP® credential, the advisor must meet certain experience requirements, complete a specific educational requirement, and pass a rigorous exam. By looking for this mark, you can help ensure that the advisor has the knowledge and experience to serve you.
  • Use www.brokercheck.org to evaluate advisors you’re considering. When you type in their names, the site shows you the advisor’s history, licenses, certifications, and official complaints. It’s safest to avoid any advisors with compliance issues, and instead only consider individuals with a clean record. Your money is too important.
When you have a shortlist of advisors, prepare a list of questions incorporating the above. Ask for responses in writing.
Finally, after you retain an advisor, you must remain involved. Always review your statements as soon as they come in, and question anything you don’t understand. Don’t let the financial plans prepared for you sit on the shelf; be sure to revisit those to make sure you are staying on track. Remember: it’s your money, and no one will watch it as closely as you will.

Looking Out For You

As a business owner, you are used to looking out for your employees and business, but you’ve got to look out for you and your family, too. No one else is there to do that for you.
But when you do, you’re taking the steps you need to help ensure you’ll always have choices in your future: sell your business, keep it, or do something totally different? By acting today, not putting it off, you can help keep those choices alive.

Alan Meckler

Since 1988 Alan Meckler has been in the financial services industry helping families, professionals and small business owners plan, save and invest for their retirement in the most tax-efficient way possible. He is committed to helping empower families, professionals and businesses to succeed asinvestors. His firm is different from other financial service professionals because they first focus onall levels of protection first, which include life, disability, long term care, and health insurance, then savings and growth. It's a model that works. As a seasoned financial advisor, he recognizes that life has many unknowns, but a little bit of planning and preparation can make even the most difficult of times a little bit easier.

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