8 Factors Businesses Should Consider When Choosing Financial Advisors

Why do you need a financial advisor instead of another accountant?

Accountants may be able to do the heavy lifting through compiling financial reports and bookkeeping, but advisors will help you analyze those results and give actionable advice based on it.

Choosing financial advisors are, therefore, a huge deal. You’re hiring someone to evaluate the way you do business and guide you towards your goals.

These are the main factors to consider when choosing financial advisors.

1. Know What You Need

What service do you require?

The more specific your answer, the better. There are various reasons why you need a financial advisor, including if you want to start a business if you need tax clarity if you want a profit and loss analysis, and more.

Financial advisory specialities also include insurance, debt repayment and mergers and acquisitions services.

Knowing which area you need help in will narrow down your choice of advisors. Not all of them will be able to provide the services that you need, so this is a good first step towards hiring your ideal advisor.

2. Qualifications

It’s imperative to choose financial advisors who have all the required credentials. This will require a bit more research on your part, but it will pay off.

Financial advisors will need licenses for different states. When approaching them, make sure to see whether they are licensed to work in your state and whether they have the necessary credentials for the service you require.

For example, a financial investment advisor will need to be licensed as Registered Investment Advisors (RIA). Some people would want to look for more certified professionals such as CFPs or CPAs, so that’s something you can keep in mind.

Often, this is the knowledge you can come across by going through their website and seeing what is listed there. It’s always good to also ask them questions.

3. Experience

A lot of financial advisors have worked different jobs before going into advising. Some financial advisors are not as experienced as others, and this doesn’t always take away from their ability to do a good job, but it may be something you want to know about and consider.

Again, your finances are a crucial aspect of your business, and you want to go about these decisions carefully.

On the contrary, you may be more open to hiring financial advisors who were once business executives within your field. This way, you know they have hands-on experience within the industry and will be able to provide better advice.

4. Do They Specialize in Your Sector?

There are various financial advisors out there, but not all of them will specialize in the services that you need. Once you’ve funneled down into a more focused idea of what you need, try to go through their website and see the types of services they provide.

For example, if you are a retailer, but your financial advisor only has experience working with manufacturers, they won’t be able to provide meaningful advice. A key factor in choosing financial advisors is industry knowledge, which goes a long way when you need actionable advice to improve sales, for instance.

5. What is Their Reporting Process?

What is their usual method of producing financial reports?

As the client, you want them to produce financial statements that are beneficial for you, at the rate you want. For instance, if they’ve only done annual reports while you require monthly reports, their process may not be suitable for the level of detail, and you require.

If they are flexible on this, that’s even better for you. Just make sure to have it clarified before you begin working together. Getting this out of the way ensures that it doesn’t fester disagreements.

6. Transparency on Fees

Ask how they will bill you. Financial advisors bill differently, so it’s always a good idea to get this out there and make sure you’re not paying more than you expected. A trustworthy and professional financial advisor will be willing to divulge on their fee expectations upfront.

Different forms of payment include fee-only, which may include a percentage of management assets, an hourly fee or a flat fee. Some will rely on commission-based systems.

7. Do They Go By a Fiduciary Standard?

A fiduciary standard means financial advisors will put your needs first and cater to your specific requests. Instead of simply going by suitability, fiduciary financial advisors are likely to be more flexible and personal in their approach to your business and your requests.

Choosing financial advisors that go by the fiduciary standard may not seem that important now, but the way they present themselves upfront will go a long way in how they will continue to communicate with you.

8. Whether They Fit with You

The trust factor is essential for financial advisors. At the end of the day, go with your gut feeling while also relying on logic and evidence.

Can you trust these people during a crisis? Do you feel comfortable sharing your financial details with them?

Your business will definitely go through ups and downs, and having a financial advisor that you can trust and rely on to help you through the tough times is a key factor in employing someone. They may have all the credentials and experience, but if you can’t trust them, you won’t work well together.

Choosing Financial Advisors is Key in Business Growth

There’s no doubt that financial advisors are important in inciting growth in your business. They are the people you go to when you need help managing issues or looking for a way to grow.

This is why choosing financial advisors requires a lot of attention. Don’t begrudge yourself from going into the specifics when choosing someone to hire, because your company’s performance may very well depend on it.

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