Finding a financial advisor who specializes in working with small and midsize business owners may seem like reason to celebrate, but before deciding if this person is the right advisor for you, be sure to ask several important questions. Getting answers before committing to a long-term relationship can save you headaches and unexpected surprises down the road. Here are five questions for financial advisors every business owner should ask:
1. How Do You Get Paid?
Financial advisors make money in different ways. Some charge a one-time fee for creating a financial plan. This fee may range from a few hundred to several thousand dollars, depending on how complicated your financial situation is.
Other financial advisors earn fee-based compensation for advising and managing investments, charging a percentage of the portfolio value annually. Or they may earn a commission, either as part of a sales load that you pay or directly from investment companies when your money is invested in their products, like mutual funds.
Ask questions about compensation, because this may impact the advice they give you. For example, large commissions paid from investment companies may sway an advisor to recommend one fund over another that may be better suited to your needs.
2. Do You Work With Many Small or Midsize Business Owners?
As a business owner, your financial plan has special considerations that regular employees don't have to worry about, so you need a financial advisor experienced with financial planning for business owners of businesses around your size. Remember, you don't have an employer-led company pension plan. Questions for financial advisors may include, "What are my 401(k) options as a business owner?" and, "What can you tell me about pension options for business owners?"
3. How Often Will We Meet?
Find out up front how accessible the advisor will be. Can you call her anytime? Will you have annual or biannual face-to-face meetings? How often will you receive a paper-based report on your investments? Can you access transaction details and reports online? Look for a financial advisor who offers in-home and/or evening consultations to accommodate your busy life as an entrepreneur.
4. How Experienced Are You?
Often, answers to questions for financial advisors will reveal their experience with helping business clients. Also ask if they have a network of other professionals, such as an accountant or lawyer, who can help with valuable input into your financial plans. At the very least, ask for references or look for testimonials on the person's LinkedIn profile from satisfied small and midsize business clients.
5. What Financial Planning Designations Have You Earned?
While almost anyone can call him or herself a financial advisor, certain designations mean they've met stringent education, ethics and experience requirements from a professional financial planning organization.
Selecting someone to help you manage your money is tough, but having a list of questions for financial advisors will help you make the right choice.
SIGN UP FOR THE THRIVE NEWSLETTER