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Explore How a Financial Advisor Can Help You in Los Angeles, CA
Contrary to popular belief, most small businesses in Los Angeles don't fail within the first year. In fact, nearly 80% of them are still humming along at 12 months. Unfortunately, things don't stay rosy for long; only half of all SMBs survive five years, and by the decade mark, two-thirds are dead in the water. Funds run out; contracts expire, and many entrepreneurs, feeling defeated, return to regular employment. Many of them never even think of consulting a financial advisor.
Financial consultants are money mavens who teach dynamic fiscal thinking. If you're stuck in a corner, the right consultant can guide you out. They also help entrepreneurs scale their businesses — and we mean scale up, not down. If you've ever wanted to run a restaurant chain or a large-scale construction company, you'll almost certainly benefit from the erudite wisdom of an on-call financial consultant.
To be successful in business, you have to know how to handle money. You need to understand how to make it grow and how to make it work for you. Profitable companies, from Bel Air to Northridge, have one thing in common —they control their finances — not the other way around. Read on to find out what you can learn from a great financial consultant, and where to find one.
What Is a Financial Advisor?
Business finances differ from personal finances. Top financial advisors with a business background know all about insurance options, corporate budgeting, tax strategies, and other savvy tactics. They can teach you how to build on your investments and hold on to more of your profits.
Types of independent financial consultants
The phrase "financial advisor" is a broad umbrella term used to describe a range of money management professionals. Several different kinds of business-centric financial consultants exist, such as:
Financial planners
These advisors help companies create action plans to meet long-term goals. You dream up your destination, and they help you get there. Some financial planners specialize in taxes, estate planning, or investments. Others hold certifications or licenses, calling themselves Chartered Financial Analysts (CFAs), Certified Investment Management Analysts (CIMAs), or Certified Financial Planners (CFPs).
Nearly anyone can call themselves a financial planner, but to hold a bona fide license in Los Angeles, individuals have to undergo training. Sometimes, they also have to have specific work experience.
Fee-only financial advisors
Some financial consultants work on commission, which can get quite expensive — particularly if they make most of their money selling financial products to clients. Fee-only financial consultants operate a lot like lawyers; they have an hourly fee or a flat fee for a specific service package. You pay the invoice, and that's that.
Many people work exclusively with fee-only advisors, their rationale being that in the absence of commission-based sales systems, fee-only consultants must be working in their clients' best interests. On the flip side, all-inclusive financial planning packages can be expensive, and fee-only advisors are not necessarily better than their traditional counterparts.
Registered investment advisors
Also known as RIAs, Registered Investment Advisors manage money for high-net-worth individuals and institutions. If your business ends up turning a major profit and you become a multimillionaire, a skilled RIA can help you manage your commercial and personal assets. Because they have a fiduciary duty to each client, RIAs have to offer good investment advice. In short, they're legally obliged to be competent.
RIAs are big fish in the ocean of financial consultancy. They're required to declare conflicts of interest, and they generally earn revenues via management fees. RIAs compete for business with hedge fund managers, mutual fund managers, wire house firms, and various types of discount brokers.
Personal financial advisors
Personal financial professionals in Los Angeles work with all types of individuals, offering tailored advice on a range of financial products. They take their clients' specific circumstances into account before offering solutions to help them navigate complex money-related situations. Some personal financial consultants operate on commission, while others charge flat fees.
Personal financial consultants provide ongoing investment, banking, and budgeting guidance. They also create wealth transfer plans, estate plans, and retirement plans based on clients' projected future cash flow, age, and financial goals.
In the USA, properly accredited personal financial consultants hold FINRA series 7 licenses, coupled with either series 66 or series 65 licenses. If you decide to shop for a personal financial consultant, look for a professional with a Chartered Financial Consultant (ChFC), Certified Financial Planner (CFP), or Chartered Financial Analyst (CFA) designation.
What does a financial advisor do?
In general, financial consultants help people make decisions about what to do with their money. To give the best advice, your financial consultant needs to know as much as possible about you — or your business.
Let's examine each of those steps in a little more detail:
Step 1: The initial consultation
Your self-employed consultant will — hopefully — remain a fundamental financial planning partner for many years, so it's important to choose someone you're comfortable with. You'll get the chance to interact with a potential advisor during an initial consultation. Ideally, choose an approachable professional with a good knowledge base and a friendly attitude. After all, you need to feel okay about sharing sensitive financial data with this person.
Step 2: The financial questionnaire
You've decided to move forward with a financial consultant: now it's time to fill out your financial questionnaire. At this stage, you'll list all of your business assets, liabilities, expenses, and income. To achieve the best possible financial outcome, everything — from the rent you pay for your company premises to the profits you bring in — has to go on this form. You'll also need to list your own long-term financial obligations, personal pension plans, possible future gifts and inheritances, and other sources of income.
At this point, tell your financial professional if you have any specific investment preferences; perhaps you'd like to invest in a particular sector or company, for example. If you have any tax-related or insurance-centric concerns, let your consultant know. If you have an existing estate plan, talk about it.
Step 3: Your custom financial plan
Questionnaire complete — on to the financial plan. To avoid conflicts of interest, you need to untangle your business and personal finances. So at this stage, your advisor will probably create two distinct financial schemes: one for you and one for your company. These plans are your blueprints for the future.
Your custom financial plan begins with an overview of your current situation, including your net worth, assets, liabilities, and liquid capital. Next, you'll find a section about risk tolerance — how much money can you or your business afford to lose if an investment goes wrong, for example — and then a section detailing best and worst-case scenarios for the future. Finally, your plan provides key advice and financial product recommendations to help you attain your goals.
Step 4: Following up and measuring results
If you don't fully understand your advisor's recommendations, or you feel skeptical about a financial product, communicate with your consultant right away. Your financial plan may need adjusting as you go forward — and it will certainly need modification if your business strikes gold, so to speak. Remember: it's your money, and you have the final say.
Finding the Right Financial Consultant
Earlier, we gave an overview of various different types of financial consultants. Some business owners work mainly with one consultant, while others have a whole team of professionals at their disposal. Before choosing a freelance advisor, create a budget and think about your financial goals. Here are a few financial planning scenarios to get your motor running:
General financial planning needs
You've been running your business for a while, and you have a good reputation in the marketplace. You began with a small investment, and now you have a substantial amount of money in the bank. The way things are going, you're likely to turn an even bigger profit in the near future, and you want to know how best to manage your company assets.
The solution: A Certified Financial Planner (CFP) or, for larger investments, a Registered Investment Advisor (RIA).
Retirement planning
You spent your 20s and 30s hustling to make ends meet, but now you run a successful business and want to create a robust retirement package. You're worried because you haven't specifically invested in retirement products before, and you need reassurance that it isn't too late to begin saving. You may or may not have a lump sum to roll over into a new scheme.
The solution: A Certified Financial Planner (CFP) or a Chartered Financial Consultant (ChFC).
Investment planning
You have money to invest and want to achieve a number of growth goals in a specific period of time. Maybe you're a first-time investor and want to learn the ropes; perhaps you have a windfall in hand and feel nervous about making solo investment choices. Either way, you need solid advice from a competent financial professional.
The solution: A Chartered Financial Analyst (CFA) or, for larger portfolios, a Registered Investment Advisor (RIA).
Trust & estate planning
You want to ensure your spouse, children, immediate family members, and other loved ones are taken care of after you pass away. You haven't drawn a formal estate plan before and need advice to proceed. Estate planning is complex, and you would rather work with a seasoned pro than a recently qualified financial consultant.
The solution: A Chartered Public Accountant (CPA) or a Certified Financial Planner (CFP) with a lengthy background in estate planning.
Questions to Ask a Financial Advisor
It's an old adage: the only silly question is the question you don't ask. That certainly holds true in the financial planning world, where money-related decisions made now pay off (or don't) many years in the future. Here are five potent queries for your financial planner:
1. What is your fee structure?
Before you dive into a relationship with your new advisor, make sure you know how much they charge. Some financial consultants are a little coy about fees, but the last thing you need is a big bill out of the blue. Don't be afraid to ask specific questions about the fee structure and don't commit unless you know roughly what you'll pay.
2. How will you invest my money?
The more you know, the more power you have. Unless you want to leave all the major decisions to your advisor, ask them how they plan to invest your money. Do they use similar portfolio management strategies across the board, or do they tailor them to clients? What are their investment philosophies? How do they divide dollars between risky and predictable stocks?
3. Which qualifications do you hold?
Some financial planners don't hold any certifications at all. To get the most out of your money, avoid those individuals and go for freelance financial professionals who have one of the following three credentials instead:
- Certified Public Accountant (CPA)
- Certified Financial Planner (CFP)
- Chartered Financial Analyst (CFA)
Look for a financial consultant who has experience dealing with SMBs, and ask them how many clients they take on each year. You don't want to be stuck at the bottom of a big to-do list.
4. Where do you recommend I put my liquid savings?
Entrepreneurs consult with financial professionals for many reasons, but liquid savings fund options and personal retirement plans come top of the pile. Liquid funds come in very handy in emergencies, so you need to be able to access them. Retirement savings are vital: they're safer in a diversified investment scheme than in a risky single-business investment. Where will your financial consultant stash your cash?
5. What kinds of new technology do you use?
Many of the biggest investment companies use new technologies, including robo-advisors, to help them make clever financial decisions. Robo-advisers are algorithm-driven programs that examine trends in the marketplace and operate with almost no human supervision. They never sleep, so they can provide 24/7 analysis on stocks, bonds, and shares. How does your advisor feel about AI in the financial marketplace?
How to Find a Financial Advisor in Los Angeles
Every day, financial consultants provide invaluable advice to decision-makers across the SMB spectrum — from first-time entrepreneurs to seasoned CEOs. Hopefully, you found the information in this guide helpful as you look for your own advisor who can help you create a solid foundation for your business's future.