Wealthy entrepreneurs and investors are amongst the most challenging and profitable clients for financial advisors.
Normally these rich people live complicated lives involving challenges with mixing family and business as well as complexities of finances. Thus, many of them need professional help to lay out their lives smoothly. Most of them have not yet evaluated their current state to check where they are, where they want to be and what help they need in getting there. Many of them may feel intimidated in their transition from baby owners to a full blast tycoon who needs the full support of financial, legal and counselling services.
The multitude of services needed by these clients is wide. Many firms offer educational resources for family enterprises, categorises service professionals into two groups: advisors and consultants. Amongst the categories, there are further sub-categories that specialised in the needs of the client, for example, investment management services, tax planning and family trust management. Advisors should take a holistic approach to determine what services a client would require at that point in time.
All the needs of a family business owner might not be catered by a single advisor or firm. It is essential to understand the resources an advisor can offer as well as the role you want them to play. Wealthy entrepreneurs need advisors to help them plans for transitioning out of their business and manage the financial aspect as well. According to experts, here the five questions family business owners should ask when seeking comprehensive wealth management services:
1. How will you help me enhance my legacy?
Most business owners don’t reach the highest potential for their business during their career. That is why they pass it on to the next generation in their family for the expansion of their business dynasty.
This process needs thorough deliberation and a lot of reflection with the family members to determine who will be able to handle the burden. Advisors don’t have to facilitate the whole succession process but they need to be there when help is needed. Family dynamics is a very specialised thing. Business advisors help train the new generation of family and business values, but don’t take on the task of the family psychologist, in the end, it is about managing the business not solving personal issues. We use other consultants for that, no one individual can have all the tools to deal with all the issues.
2. Have you experienced helping business owners successfully transfer or sell their businesses?
Clients prefer wise and experienced small business advisors with a unique understanding of family business. An entrepreneur who does not have specific plans for retirement and specific vision for the future of the company needs an advisor who can guide him through various types of situations. An advisor who is known to have experience with businesses that have been passed to the next generation, has undergone a major restructuring or have been sold to a third party. Clients like to hear real stories of success and learn about the wisdom of the advisor acquired from different situations. The advisor ought to be able to come up with a variety of solutions and a plan for the business.
3. What resources do you have to value my business?
The most difficult decision a family business owner has to make is whether to put the business for sale or to pass it on to the next generation. Business advisors who really care work on helping the owner make the right decision. Making cash flow projections and long-term forecasting taking into account market fluctuations is a great skill and must do the task. Advisors who have great useful connections with others in the industry such as banking experts and real estate professionals are also valuable.
4. What process will you use to determine what resources I need?
Clients want a reliable advisor who will be able to manage their needs properly. They would like to hear how the advisor can assess their needs as his strategies that could address their concerns. The clients need to know if the advisor has enough resources and skills to address their concerns. Every small business is different and perhaps your laser skin clinic business is flourishing, however, it is time to expand your services to include the latest fotona laser skin tightening services. Or maybe your bakery business needs an interior transformation to modernise. A good business advisor would have the resources and skills to identify issues and address them.
At some point in time, business-owner clients will need help with legal issues, bookkeeping, tax, business ventures and even business consulting issues. Clients need to know if the advisor can determine when these types of services will be needed and how much of the work they can handle themselves. Is there a process in place where the business advisor will seek other experts or skills to help the business? Every business advisor has limitations so it is important that they have a network of helpers who can step in.
5. How are you compensated?
This question is something clients rarely understand. There are two ways an advisor can be compensated. For fee-only advisors, they usually work for a percentage of assets under management. While for usually bigger firms with broader ranks of advisors, counsellors, and experts—work for a percentage of net worth.
Clients need to know if the advisors are also rendering services to other clients, whether they receive any commissions from the sale of investment products. It need not disqualify the advisor, but if he or she is receiving other fees for services, then transparency should be in order.
