Successful small businesses serve the needs of their customers. And owners of those businesses know they also need to take care of their own needs. For example, will I have enough money to retire one day? How will I pass the business on? To answer these questions, some owners turn to a financial advisor. Start by asking these four questions to help find an advisor that fits your needs.
The term “financial advisor” can be confused with other financial professionals like accountants, insurance agents, investment counselors and stock brokers, to name a few. While advisors may work closely with each of these other professionals, they tend to have a broader focus. Financial advisors typically look at your entire financial picture and develop a detailed plan to meet your financial goals.
4 Questions to Ask
When looking for a financial advisor, start by asking these questions:
- How are you compensated? Some advisors are fee-based. You pay a flat or hourly fee. Others are commission-based, paid when they sell a financial product. Some are a combination of both. Advocates of fee-based advisors say they are more client-centered, since they are not motivated by a sale. Others contend that commission-based advisors have a broader knowledge of products to help recommend the right one for you. In either case, you want someone who is looking out for your needs, not their own.
- What training do you have? There are several professional designations that establish standards for financial advisors. They typically require an advisor to meet education, examination, experience and ethical requirements, then recertify their standing on a regular basis. Two common designations are the Certified Financial Planner (CFP) and the Chartered Financial Consultant (ChFC). Some designations include a fiduciary oath that requires the advisor to act in the best interest of their clients rather than for their own profit.
- Do you work with small businesses? You want to find someone who has experience with owners of small business and the challenges they face. Ask what percentage of their clients own small businesses and what range of services they provide for them. Some advisors specialize in business-related services and others in personal finance. You may want someone who can do both.
- What is their process? Ask the advisor to describe their process for developing a financial plan. Their first step should be to listen; he/she should talk with you about your goals. Then many advisors gather your financial information and analyze areas of strength and concern before formulating a recommendation. Ask how often they review progress with you to determine if adjustments are needed.
For More Information
There are several resources to locate a financial planner including the Financial Planning Association and the National Association of Personal Financial Planners. FINRA offers BrokerCheck, which lets you check whether there is any disciplinary action taken against the advisor. You might also ask for referrals from your small business contacts.
It’s important to consider several advisors before making your final choice. Meet with each to get a sense for whether they would be a good fit for you. And start by asking the above questions.