What Financial Planners Do for Business Owners

I recently received an email from one of my podcast listeners. In it, they explained that they’ve listened to the show for quite a while and that they’ve learned a lot. However, they had a question that I’ve heard several times before. So, I thought that I would dedicate today’s post to answering their question. What do financial planners do for business owners?

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TIME INDEX:

• • 00:59 – What Does a Financial Planner Do For Business Owners
  • 02:01 – Different Types
  • 04:07 – Requiring a Different Approach
  • 08:14 – The Four Quadrants
  • 13:46 – The Role of a Financial Planner
  • 18:36 – Summary

Is Your “Financial Planner” a Financial Planner?

In order to answer the question, “What do financial planners do?” I first need to define a few things. Namely, the difference between someone who works in the financial realm and a CERTIFIED FINANCIAL PLANNER™. You see, there are many people in the financial world who like to call themselves financial planners. However, stockbrokers and insurance agents don’t adhere to CFP^®s standards. Likewise, there are some actual CFP^®s who don’t operate like a CFP^®.

The term, “financial planner,” has become a kind of buzzword in the industry and many people try to capitalize on it. But a true financial planner does more than just invest your money into Wall Street or ensures that you have enough insurance to mitigate the risk in your life.

I can recall being a young business owner and visiting a “planner” at one of the big box investment firms. I sat there across the desk from him, having just made over $100,000 (before the age of 18) in my business. I’ll never forget what he said to me. He said, “You’ve done quite well. But when you want to learn to make real money, bring your money to us and I’ll invest it for you.” I still get angry at the audacity of this “planner” to act as though I didn’t know how to make money.

As business owners, we are rock stars. We know how to make money. That’s why so many of us are turned off by the brokers on Wall Street. They operate with the mindset that only they are capable of making “real” money. On the other hand, there are many people who work in the financial realm and do genuinely good work that helps people. However, business owners are a different breed. We don’t need someone to teach us how to make money. So, what do financial planners do?

The Four Quadrants

In your mind’s eye, I want you to envision a box. In this box, are all of the things that you can control as a business owner. There are four quadrants in this box and you have the ability to become a “Google expert” in each of them. These four quadrants are:

1. Cash Flow: This is the income you produce within your business and the items you spend it on. How you get paid and what you spend the money on is within your control and varies based on how you’ve got your business structured.
2. Risk Mitigation: This includes all of your insurance coverages. Essentially, any product or service that you can use to protect your business falls into this quadrant.
3. Investments: Here’s where Wall Street comes into play. However, investing is about so much more than stocks and bonds. There are four primary investment categories. As a business owner, you can invest in your business, real estate, qualified, and non-qualified assets.
4. Distribution of Money for Life: You have control over how you distribute the money you make. Are you going to spend it on a new building? Perhaps, you’re setting up a college fund for your children. Whatever you want to do with your money, you’re in control of this.

Although you understand these four quadrants and control them, that doesn’t mean that you handle them efficiently. A financial planner helps business owners maximize these areas by making them efficient. They are able to create plans and strategies that make these four quadrants work in synergy with one another. Now, these plans and strategies are going to be different on a case-by-case basis because no two situations are identical.

What Does a Financial Planner Do?

In my own practice, we use the four quadrants to teach clients they can double their net worth every 3 – 5 years. Of course, we can’t guarantee these results but in many cases, we are able to achieve this goal. However, simply putting to work the elements that business owners are already able to control isn’t where the true value of a financial planner is found. Instead, it is the areas that are outside of that imaginary box—the areas that business owners can’t control—where financial planners truly begin to shine.

By bringing the areas that business owners can’t control, into effect, financial planners are able to further maximize the efficiency of the four internal quadrants. This alignment makes it possible for the business owner’s net worth to double every 3 – 5 years. So, what are these uncontrollable areas?

• Taxes. Sure, you could move to an area with lower or no state or local tax. But beyond that, you really can’t control the tax rate.
• Inflation. Whether you like it or not, inflation is just about certain to take place and you can’t control its rate or effect on you, your business, or your lifestyle. I remember going to the gas station, to fill up the lawnmower, with my dad. The price was $0.47 per gallon. We were able to fill up the mower and one-gallon gasoline can for less than a dollar! Look at the price of gasoline now. Inflation takes its toll and there’s nothing you or I can do about it. Financial planners help to plan for the financial impact of inflation, though.
• Time. You can’t control how much time you have. Not when it comes to work, life, or family. Everyone has the same amount of time per day. No one knows when they will die or become disabled. There’s no way of knowing when family members will pass on. Time continues on with no regard to how anybody feels about it.
• Rate of Return. As much as every business owner or investor would like for this last one to not be true, it is. You can’t control the return on your investment. This is why entrepreneurship and Wall Street investing is inherently risky. Each time you start up a business, every time you invest in the stock market, there is a potential for loss.

A financial planner walks a business owner through a process that guides through all of the four quadrants while incorporating the areas that business owners can’t control. They do this so that the business owner can see where they are going, giving them a clear path toward achieving their goals in a tax-efficient and time-efficient manner. Financial planners are guides or coaches that identify your current status and align it with your future goals

Wrapping Up…

At the end of the day, financial planners help their clients get from point A to point B in the most tax-efficient and time-efficient way possible. We don’t simply exist to invest your money or to help you get the insurance you need. We can do those things but that’s not our primary focus.

Friends, life is tough but life is good. Coordinating all aspects of your financial life to achieve your goals in the most efficient way possible can be frustrating. But it doesn’t have to be. Knowing how to answer the question, “What do financial planners do?” can make the decision to hire one, at least, financially simple.

If you think that you and your business could benefit from the services of a CERTIFIED FINANCIAL PLANNER™ or if you have questions about the services that we offer, reach out to us. The team at Financially Simple is ready to meet with you!