5 Questions to Consider Before Hiring a Business Financial Advisor
In every part of your business, you are likely to hire specialists for certain roles, from manufacturing to sales to human resources, so why should managing your business finances be any different? Even for those who are numerically minded, a financial advisor can provide numerous benefits.
However, there are five things that you should consider before hiring a financial advisor for your business.
1. What financial services do you need?
The first thing you need to consider is what financial services could your business benefit from? Is it general bookkeeping, attracting investment, business financial planning, managing cash-flow or are you looking for retirement planning tips?
A business financial advisor can help you with all of these plus so much more. It is likely that one of the first questions they will ask you is, ‘what would you like to achieve?’ Knowing the answer to this question will help you establish which specialists you actually need.
2. What is their specialism?
Financial advisors come in many shapes and sizes and the term is often used to capture a host of different roles within the financial markets. When hiring a business financial advisor, you should consider what their specialism is and look beyond the job title.
The Department of Labor’s new fiduciary rule could complicate matters further for brokers, insurance agents and advisors if it goes ahead, and job titles may not reflect their skillset fully. Before hiring someone, you will need to establish where their expertise lies and, just as importantly, what their remit of responsibility will be.
3. How they get paid and do they add value?
Adding to the point above, you will want to establish how the financial advisor gets paid and whether they add value to your business. The two most common forms of payment are:
- A fee payable by you for a particular service.
- A commission paid by a third-party upon the sale of a certain product or service.
In the past, questions have been raised about commission payments and whether it means the advisor is really working for you or the commission payer. Equally, though, it relieves some of the financial burdens from you of having to pay for a service up front. There are advantages and drawbacks to both options and you will need to weigh what works best for you.
What is perhaps of equal importance is the value a financial advisor offers. Do they save you time, hassle and stress? Will they prevent you from missing an important deadline or mitigate risk? These are not always factors that a cost figure can easily be attributed to, so you will need to look deeper than the headline price.
4. How do they communicate & operate?
You will also want to consider how the financial advisor operates and communicates with their clients. Will you be one amongst thousands of other clients, or be pawned off to the new associate? Will you only hear from them at financial year-end or will you have weekly face-to-face meetings? Will they adapt the services they offer as your business goes through it’s varying life stages and, for example, provide retirement planning tips as you get older?
The answer to such questions will probably rest with how big your business is and what your requirements are.
However, you should not be afraid of challenging and questioning a financial advisor before employing their services. After all, they will end up working for you and expectations will need to be set early on around how the relationship will function.
5. Are they familiar with your industry?
The final point to consider is how familiar they are with the industry you operate in. Will it take them a while to understand the nuances of the industry or onboard them to your business model? Finding a financial advisor that you can trust is critical and part of that trust will be built on you having confidence in their ability.
Advisors who have other clients in your industry will be able to get up to speed more quickly and help add to the ‘value’ mentioned earlier. This is not to say that you should avoid advisors who have no experience in your market, but you will need to determine how much you think that experience is worth when it comes to carrying out business financial planning activities.
Hopefully after reading this post, you will be able to decide whether a financial advisor will be of benefit to your business. If you have had success with the council of a financial advisor, let us know in the comment section below.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.