Employing a financial advisor can be a dilemma for business owners who are used to controlling their own finances. So, is it worthwhile seeking outside help?
Financial advisors or planners can help develop an overall financial strategy for the business, including advice on the business plan, insurance, superannuation, succession planning and tax. For time-poor business owners, expert advice can prove extremely valuable for their own personal futures, particularly given recent surveys identifying financial issues such as cash flow as the most troubling for Australian businesses1.
"SME owners are invariably among the most time-poor individuals around," says financial planner Brett Stephenson. "They have usually spent many years of their lives building up their businesses and taking care of their staff and customers, but often forget to provide for themselves and their families."
According to Stephenson, business owners should pay particular attention to the areas of superannuation and income protection insurance for their own needs and that of their staff.
Business owners may also be neglecting their own super, with a recent survey finding that more than a fifth of Australian women business owners are not a member of any super fund2. The business, however, is not a substitute for superannuation and owners need to remember to pay their own super contributions, taking advantage of the 15 per cent tax on contributions compared to the 30 per cent corporate tax rate.
Corporate super funds also offer reduced insurance rates and lower fees, including centralised payment services. For businesses with 19 or fewer employees, it is possible to pay staff contributions to the Small Business Superannuation Clearing House in a single free electronic transaction.
Another strategy is having the business premises owned by your own self-managed super fund, leasing the property back from the fund. The maximum tax rate paid by the fund on rental income is just 15 per cent, while there are also concessions on future capital gains.
Income protection insurance is important for business owners, particularly those with families to support.
"If you couldn't work for six months, would you be able to pay a replacement, and how would you meet your household expenses? Do you know the difference between level and stepped premiums, how to claim tax deductions on income protection cover and the level of cover you require? These are all questions your financial advisor can answer for you."
Finding an advisor
Financial advisors are required by corporate law to hold an Australian financial services (AFS) licence. The Australian Securities and Investments Commission (ASIC) provide an online professional register service that allows users to check licensees. Ask your personal network for recommendations on financial advisors or check the referral services provided by the Financial Planning Association, CPA Australia and the Association of Financial Advisors.
ASIC suggests asking the advisor whether they are experienced in your area of business, what products they can advise on, their qualifications and AFS licence, processes and fees. A good financial plan should summarise your financial position, list your goals and explain how to reach them, show how the investment strategy will work and disclose risks and costs.
Consulting a financial advisor can help over-worked SME owners take a step back from day-to-day routines and consider the possibilities offered by various business structures, in addition to reviewing opportunities to reduce costs and maximise returns.
According to Forbes contributor Steve Parrish, business owners can be guilty of "bending reality and making ourselves believe that which is convenient". With a US survey finding more than half the clients of financial advisors "stretch the truth", appointing an advisor can help the deception stop and action begin3.
Quotes from writer interview
This article represents the views of the author only and not those of American Express.
Anthony is a communication consultant at BWH Communication and a freelance writer with 15 years' experience in the stockbroking and media industries of Australia and Asia. He is a regular writer on business and other issues for publications in Australia and Japan. He consults on communication strategy to businesses ranging from private enterprises to professional service firms and publicly listed companies, with a particular interest in entrepreneurship in all its forms.