Business owners often ask two fundamental questions: Do I need a financial advisor, and how do I choose one who can help me coordinate both my business and my personal financial life?
For many business owners, income, net worth, and future plans are closely tied to the company. Whether you need an advisor depends on the complexity of your financial situation and, more importantly, whether anyone is connecting the business to your broader picture. An experienced advisor with tax knowledge can provide significant value when your business represents a substantial portion of your net worth, a transition or sale is on the horizon, or your financial, tax, and legal professionals are working independently rather than as part of a coordinated strategy.
Not every advisor is equipped to coordinate business ownership and personal wealth planning. An experienced advisor understands that decisions made within the business can significantly impact personal cash flow, taxes, retirement, estate planning, investments, and future liquidity. Rather than treating these areas as separate conversations, they help ensure each decision supports your broader financial objectives, now and in the future.
Signs you may benefit from working with a financial advisor
While every business owner’s situation is unique, certain circumstances often signal that a more coordinated approach to financial planning may be beneficial. You may benefit from working with a financial advisor if:
- A significant portion of your net worth is concentrated in the business, and there is no clear planning around your personal financial future.
- Business and personal decisions are becoming difficult to separate.
- A sale, succession, leadership transition may be approaching or an unexpected opportunity could be on the horizon.
- Tax, estate, retirement, employee-benefit, or liquidity decisions are becoming more complex for you to keep up with or understand.
- You have a team of professionals, but no one is coordinating their advice into an integrated strategy.
- Your current advisor focuses primarily on investments and less on how the business affects the rest of your financial life.
In many cases, the missing piece is an integrated planning process that connects business decisions with personal goals, taxes, investments, estate planning, and future liquidity needs into a cohesive plan.
Regardless of the challenges you face, working with an experienced financial advisor who understands the complexities of business ownership can be invaluable in helping you avoid costly mistakes. As your business grows and your financial situation becomes more complex, having a trusted advisor who can help you see the bigger picture may become increasingly important to you.
What to look for in a financial advisor
Many advisors say they work with business owners. More important is whether that experience meaningfully shapes the advice they provide and the way they approach financial planning. The right advisor understands that your business and personal financial life are interconnected and should be planned for accordingly.
When evaluating an advisor, look for the following:
An integrated planning approach. Your business should not be treated as a standalone asset that is reviewed only occasionally. An experienced advisor should consider incorporating business decisions—including compensation structure, retained earnings, debt, and owner distributions—into your personal financial plan from the outset, recognizing how they affect cash flow, taxes, investments, retirement, and long-term goals. This should also include an evaluation of the business entity structure and the tax implications associated with that choice, particularly in the context of a future sale, ownership transition, or succession plan.
Experience guiding business owners through major transitions. Whether you’re building value, planning for succession, preparing for a sale, or transitioning from business income to portfolio income, your advisor should understand the unique financial, tax, and planning considerations these events create. Ask specific questions about situations similar to your own to assess their depth of knowledge and track record in navigating these complex transitions.
A disciplined, repeatable planning process. Business owners’ priorities evolve over time. Rather than offering one-time recommendations, your advisor should have a structured process that adapts as your business grows, matures, and ultimately transitions.
A connected perspective. Decisions about retirement plans, owner compensation, succession, taxes, estate planning, liquidity, and personal investments should not be made in isolation. Your advisor should understand how each decision influences the others and help coordinate them within a comprehensive approach.
Collaboration with other professionals. Effective advisors recognize the value of a coordinated team. They know when to involve your CPA, attorney, and other specialists and can help ensure everyone is working toward the same objectives.
For more in-depth information on the planning areas owners may need to address, see Modera’s Financial Planning for Business Owners Guide.
To review an example of how a coordinated financial plan comes together, download our sample financial plan.
Questions to ask a prospective advisor
The questions you ask can provide valuable insight into an advisor’s approach to planning and whether it aligns with your needs as a business owner. Focus on understanding how the advisor approaches planning, works with business owners, and coordinates the many financial decisions that shape your long-term success.
- How many business owners or families with situations like mine do you advise?
- How do you incorporate the business into the personal financial plan?
- How do you prepare clients for a sale, succession, or liquidity event?
- How will you coordinate with my CPA, attorney, and other professionals?
- What planning work should I expect during the first year?
- How often will the plan be reviewed as my business and priorities change?
- How do you help business owners prepare for opportunities or challenges that arise unexpectedly?
Look for answers that are specific, supported by real examples, and reflective of a thoughtful, well-defined planning process.
How to evaluate compensation and potential conflicts
Understanding how an advisor is compensated is an important part of the evaluation process. An advisor’s compensation structure does not, by itself, determine the quality of the advice you receive, but it can help you better understand potential conflicts of interest and the questions to ask.
A fee-only advisor is compensated directly by clients and does not receive commissions or compensation from financial products. Fees may be structured as a percentage of assets under management, a flat retainer, an hourly rate, or a combination of these approaches. While this eliminates commission-based product compensation, other potential conflicts may still exist and should be disclosed.
Note: Seeking advice on an hourly basis may unintentionally limit proactive communication, as cost considerations can create hesitation around reaching out when guidance is needed.
A fee-based advisor may receive fees from clients as well as compensation from financial products, referral arrangements, or other sources. These compensation arrangements can create conflicts of interest, so it is important to ask what additional compensation the advisor or firm may receive, how those conflicts are disclosed, and how they are managed.
Regardless of the compensation model, your advisor should be able to clearly explain how they are paid, identify any potential conflicts of interest, and describe the steps they take to disclose and manage them.
How to ask about fiduciary responsibility
A fiduciary standard generally requires an advisor to act in the client’s best interest when providing advice. Ask whether the advisor will act as a fiduciary throughout your relationship, whether that standard changes depending on the services they provide, and how that commitment is documented. You should also understand how the firm identifies, discloses, and manages potential conflicts of interest. Clear, specific answers can help you understand how the advisor’s fiduciary responsibilities are applied in practice.
What a coordinated planning process should include
A coordinated planning process should bring together both your business and personal financial life into a single, evolving strategy. It should address your goals, obligations, risks, and long-term priorities while recognizing how decisions in one area affect the others. The process should also establish how your financial advisor will work alongside your CPA, attorney, and other trusted professionals so that tax, legal, investment, retirement, estate, and business planning decisions are aligned rather than made independently. As your business, family, and financial priorities evolve, the plan should evolve with them.
When to begin the relationship
Planning does not need to wait until a transaction is on the horizon. In many cases, the best time to begin is when your business becomes a significant driver of your personal financial future or when major decisions begin to take shape.
For owners anticipating a sale, succession, or other business transition, starting several years in advance can provide greater flexibility and create opportunities to address tax, estate, and liquidity planning before a transaction is underway. The final 12 to 24 months before a sale are often particularly important, as some planning strategies may become more limited once a deal is in progress.
Beginning the planning process early also allows you to respond thoughtfully to unexpected opportunities rather than making important financial decisions under time pressure.
Communication is key. Let your advisor be a part of your sounding board when making decisions.
How Modera can help
Modera helps business owners integrate their business and personal financial lives through a coordinated planning process. We work alongside your CPA, attorney, and other trusted professionals to help ensure that business decisions support your broader financial goals, today and through a future transition.
As a fee-only fiduciary firm, Modera is built around long-term advisory relationships and works alongside clients’ existing CPAs and attorneys.
Modera does not draft legal documents or provide legal or tax advice. It works alongside clients’ attorneys and tax professionals to help coordinate decisions across the broader financial plan.
Download our sample financial plan to see what a coordinated planning process can look like on paper. When you are ready to discuss your situation, find a Modera financial advisor who can help you evaluate the next step.
