While my list is likely incomplete, these are issues we are involved with when working with a business owner anticipating a business exit.
1) Enforce discipline. Many, many people employ coaches to learn to play the piano, keep them exercising, dieting, or growing their company. Yet, when it comes to that key foundational asset, their money, they resist using a financial advisor. Remember, step one of financial planning is to earn more than you spend. If the financial advisor simply helps you just do this, they are worth some compensation.
2) Forward looking tax advice. Historically, most tax accounting firms have made their money serving a basic need, helping people and companies file their taxes. Their culture is not conducive to charging fees for advice beyond tax decisions, and many will make no suggestions on future decisions. If you doubt this, do an experiment on your own and ask a tax accountant what you should do. Odds are you will get a multiple-choice answer. Accomplished financial advisors lead their discussions on tax issues for the future. This is especially true with exit strategy financial advisors.
3) Usually, there is no hourly fee. Generally, financial advisors do not work by the hour, so you can ask many, many questions at any time and not get a bill for the time spent. On many occasions I have had clients say they didn’t want to ask their tax advisor questions and get a bill in the mail. Likewise, often when I ask the client’s tax or legal advisors questions, the client gets a bill in the mail for time spent. Again, with an accomplished financial advisor, you have no worries about asking questions and getting answers and then that bill in the mail.
4) You learn more from the questions they ask you than the questions you ask them. The best advisors ask their clients questions the clients never thought to ask. Often, this shifts the client’s thought paradigm to a new level they never even considered.
5) Leveraging their network of support. Other professionals are attracted to seek relationships with financial advisors for all the right reasons: they want referrals. I am not a CPA, not a Business Broker, not an Investment Banker—but I know many of each and can save you time by directing you to a few that I think best fit. Like others, I consider myself a financial advisor for business sales. This is good for the well-connected advisor’s clients, for they can get multiple references when they need advice on anything from accounting advice to selling a business. Further, the client can get introductions to multiple professionals in any field so they can ask each of those professionals the same question and see if the answers as consistent.
…and a bonus reason.
6) Dealing with parent kid issues. This could be whether to bring in-home custodial care for your parents, or send your kids to private school, you, Ms. Client, have not faced these issues before. Your advisor most likely has. Even if it isn’t financial, you can get their perspective on these intensely personal issues without having to share these secrets with your friends.
About Michael Ross
Michael Ross is a 30+ year veteran financial advisor. After 30 years with Morgan Stanley, he is now an independent financial advisor who specializes in helping business owners exit their businesses and move to the next phase of their lives.