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In the 2023 National State of Owner Readiness Report prepared by the Exit Planning Institute, a whole bunch of really valuable information is shared freely with the business owner community. One key thing is that in sharp contrast from the 2013 Report, Financial Advisors moved from 5th most trusted to the #1 slot. Accountants, the #1 in 2013, moved down to #3.
To summarize, the value business owners in Generation X put on issues associated with professional financial planning is what drove that dramatic shift.
My question to business owners is this: How trusted is your relationship with your financial advisor?
There are several levels to that question and, if you will allow me, I would like to briefly explore them.
1. Does your financial advisor provide value on the personal AND professional financial planning parts of your life?
For business owners, comprehensive financial planning must include at least twice as much work as a personal financial plan. If they don’t you might need an introduction to one that will (I know a bunch all over the country).
2. Does your financial plan include an accurate representation of the current value of your business and the projected value at your desired exit date?
If not, you have a big problem because your business almost always represents a significantly larger part of your retirement assets than your 401k (for example).
3. Do you include your financial advisor in your strategic planning and review?
Remember, this professional (unlike almost all the other advisors you hire) is not only vested in your current success…they are also going to be actively working for you in a critical role AFTER you exit.
4. Does your financial advisor have the network to not only handle your personal financial situation, but also drive growth and security in the business?
This is a big differentiator between financial advisors. Finding a quality business consultant to address HR issues is very different from knowing an estate planning attorney for example.
When I work directly with business owners on growing and selling their business (exit planning), I always insist on reviewing their personal financial plan and their personal plan for their life after exit. These two documents (it doesn't count if they aren’t written down) tell me instantly where their current financial advisor is in reference to trust and influence.
If I see clear evidence that there has been adequate analysis of the value of the business, professional risk mitigation evaluated and taken action upon and a written plan for life after exit that matches up with the financial projections of the financial plan…I know I have a true professional in the mix.
If not, I have some challenges out of the gate working to truly help drive significant impact for the business owner. The hard question at that point is do I need to work with the business owner to ‘fix’ their current advisor’s relationship with them, or, do I need to help that owner find a much better professional to serve in this most vital role?
Let me land this plane: business owners need to have their personal financial advisor in a very close and influential role in their lives personally and professionally.
You need to make sure that your advisor not only can manage a portfolio and sell you some insurance…you also need to make sure that they can sit in on a board meeting and be able to represent your future retirement in that meeting. Asking questions and providing value on the business side of the ledger where most of your future wealth is in play and at risk.
What are some ways that a business owner can begin to evaluate their current financial advisor (or future advisor) as to value on the business side?
- Are they a CEPA? The largest and most credible organization in the world solely focused on driving value for business owners is a good place to start. Do they possess the credential? Are they active in the community? Honestly, if they are a CEPA, they are probably already trying to help you with this.
- Does their financial planning include a comprehensive evaluation of your business and its value and future value? Is that a guess from you, or, has there been a process that includes professionally vetted software/experts to provide accuracy. This is a big weakness in almost all financial plans that non-exit planning financial advisors do.
- Do they possess a professional network that can help you grow and protect your company and are they using it for your benefit right now if they are your current advisor?
- Have you had some long and challenging questions about not only the financial side of retirement/selling your business and the personal side of this extremely drastic change of identity for you? If not, time to look around for a new advisor.
These are just some of my thoughts for business owners on finding and working with the right financial advisors. I hope it has either helped you value your current one even more than before or helped you figure out that you are being drastically underserved and need to make a switch.