As part of the Starting a Business series, we discussed building the Professional Advisory Team that you will need as a startup business. Because there is so much to know about each member, we are going into a lot more detail about the first person on the list: a CERTIFIED FINANCIAL PLANNER™ or CFP® for short.
To me, one of the most important players on your business team is a CERTIFIED FINANCIAL PLANNER™. Often referred to as a CFP®, these professionals often have varying licenses in real estate, insurance, mortgages, business acquisitions, business sales, or security investments. However, you are looking for a certified planner, someone who specializes in planning. You need a CFP® to help you plan your business venture and your financial movements.
At this point, your business will be your life and your livelihood. Therefore, you need a CERTIFIED FINANCIAL PLANNER™ to comprehensively manage your wealth and to act as the captain of your team. This person can direct your movements, or your “plays,” in accordance with your short-term and long-term goals. My job is to understand a client’s goals and help them develop a plan of action to meet those expectations and do my best to keep them from getting derailed along the way—much like a fitness instructor would do for your body. Additionally, he can communicate your vision to your entire advisory team and keep everyone in the same court.
Now is not the time to enlist the help of an advisor who works solely with investment accounts and investment options. Working in market securities is not business advising. Sure, you will need someone to manage your investments if you have any outside of your business, but you need so much more than that. You need business advice, tax advice, investment advice, wealth management advice, budgeting advice, legal advice, employee advice, management advice, value growth advice, and more. Traditional CFPs® work as stockbrokers, earning commissions from selling investment products to individuals. Most likely, those employed in that capacity will be of no use to you in a business sale.
Instead, find a multi-credentialed CFP® who can guide you through preparations for your business start-up, through the life cycles of your business, through the eventual sale of your business, and through your life after the sale. A CFP® who has a Certified Exit Planning Advisor (CEPA®) certification and a Certified Value Growth Advisor (CVGA®) certification can offer you sound guidance throughout every cycle of your business’s life and throughout every stage of your personal financial life. When you look for the right individual to captain your advisory team, be sure to look for one who can handle this multi-faceted type of long-term relationship, and for one who works independently of Wall Street’s investment expectations.
Additionally, as you look for a financial advisor to fill this role on your team, make sure you find one who has the actual CFP® designation. With the CFP® Board requirements, you can be sure its members abide by certain practice standards and codes of conduct to remain certified. For example, a CFP®must lay out in writing exactly what he plans to do for his client and what fees he intends to charge for that scope of the engagement. Additionally, the board requires its certified members to be fiduciaries or professionals who use their knowledge, education, and experience to act in your best interest. In my financially simple terms, as a fiduciary, the CERTIFIED FINANCIAL PLANNER™ makes financial decisions on your behalf as if he were in your shoes.
As your team captain, your CFP® is also going to make decisions for the good of your whole team. He will know which players to bring forward onto the court to help you, and he will put them in the correct positions to do so. Then, he will direct and lead the game plays, utilizing team members’ strengths, and mediating team member conflicts.
One of the biggest misconceptions when it comes to CERTIFIED FINANCIAL PLANNERS™ is that only the affluent can afford them. That could not be further from the truth. In all honesty, as a small business owner, you can’t afford NOT to hire a CFP® when it comes to planning for future expenses.
We all know the benefits of hiring a personal trainer if you’re looking to lose weight. After all, even Olympians employ a coach to help prepare them for competition, which is exactly where a CFP® comes in. You want to win when it comes to your business. That makes choosing to work a CFP® a critical strategy you want to employ in your overall game plan.
Just as important as working with a CFP® is knowing how he’s paid. Many times, financial planners will earn commissions on securities they sell, on investment trades they make, or on products they promote for purchase. If you have individual investments, your CFP® may indeed earn some type of commission. However, if he’s acting as more than your individual market securities investor, then most likely, your CFP’s®going to charge flat fees or hourly fees. Perhaps, he’ll charge yearly fees between $3,000 – $5,000. Or maybe he’ll charge you an hourly rate between $200 – $400. I’ve even met one CFP® who charged $500 an hour.
The good thing is when working with a planner, the planner will likely find a way to offset their fees. This may be in the form of tax savings, debt reduction strategies or budget cuts you may have overlooked. Planners are often well versed in the insurance world too, so with most people being insurance poor it definitely helps to have trained eyes looking at your policies. There are a plethora of ways a CFP® will save you enough money to cover their own fee and then some. When it comes to hiring a CFP®, they’re going to charge you fairly.
I challenge you today. Instead of asking yourself, “Can I afford a CERTIFIED FINANCIAL PLANNER™?” Ask yourself, “How quickly can I hire the right CFP® for me?”