Finding a financial advisor to manage your business can be tricky, and if you are not an expert in money management, an advisor is going to be essential to the success of your business. One very important thing to keep in mind when you are searching for an advisor is to remember that you are hiring a professional to work for you, so treat it like an interview. If you have hired employees before, you should approach hiring a financial advisor in a similar way. Ask them questions, and keep in mind that when financial firms offer free advice or advertise to you this is usually a bad sign.
You need an advisor who is going to work in your business’s best interest, and often firms that are pushing their services on you have advisors who are more like salespeople than anything else. These financial advisors are not going to be people that you can trust with your company’s money because they often put their own self-interest ahead of yours. If you are looking for a financial advisor to manage accounts for your business that isn’t going to run the company into bankruptcy, here are some helpful tips to avoid hiring someone you don’t trust.
As a fiduciary financial advisor, their job is to manage your accounts in a way that is always aligned with your best interests. It is important to make this distinction when searching for a financial advisor that is trustworthy because not all financial advisors are fiduciaries. According to the Investment Advisers Act of 1940, an investment advisor, or anyone who is going to give investment advice as a business, has a legal fiduciary responsibility to their client.
However, the requirements and measures of this act are very broad, and there aren’t really specific requirements that advisors do anything beyond acting in the best interest of their clients. This means that registered investment advisors are required by law to act as fiduciaries, but broker-dealers and other kinds of money managers are not. Therefore, when looking for a financial advisor you want to be sure that they are required by law to act as a true fiduciary.
When seeking a financial advisor to help you manage your business’s finances, you need to make sure that you are checking the credentials of anyone you consider. Some well-recognized certifications you should look for are a chartered financial analyst (CFA) or a certified financial planner (CFP) because these kinds of credentials require the advisor to act as a fiduciary.
Financial advisors have mastered a very complex set of information. If they have passed a comprehensive examination of their knowledge with one or a series of tests to receive these certifications you can be sure that they are going to be well prepared to handle the finances of your business. They have also agreed to abide by a code of ethics when receiving these certifications. You can use the CFA institute’s website or the CFP board’s website to verify these credentials.
Scott Bishop, who is CFP certified and the executive director of wealth solutions at Avidian Wealth Solutions says, “The financial industry is not a strong ‘profession’ in that when you see a doctor or lawyer, you kind of know what you will get – even though quality and expertise may be different among firms”. Bishop says that the differences between the advice offered at different financial firms can vary greatly. Often salespeople are posing as advisors especially when employed by a large company so you want to be careful and understand how your potential advisor is being paid.
It is best to look for fee-only advisors to avoid conflicts of interest in the financial industry. While it may seem obvious, you want an advisor who works for you and is only paid by you and their other clients. The drawback of this is that all of the money they make from managing your business comes out of your pocket, however, it also means that you are more likely to see financial success. When you hire a fee-only advisor they are less likely to push their own agenda and more likely to help your business do well.
Roni Davis is a writer, blogger, and legal assistant operating out of the greater Philadelphia area