June 2007: by Steven Krueger

Show me the process

As a business owner, you are constantly being bombarded with risk and opportunity. Managing the risk to support new opportunities is always a challenge. To help alleviate some risk, you may hire professionals like lawyers, accountants and financial advisors.

Choosing a professional financial advisor is an important decision. Here are a few tips.

A good process in any business reduces errors and risk, while preventing opportunities from falling through the cracks. This principle can be applied to financial planning. You can use a shotgun approach (solving scattered problems individually) or a comprehensive approach (the big picture).

With the big picture approach the odds of opportunities falling through the cracks is reduced provided the process is extensive.

For example, adding another partner to the business can be accomplished with a simple agreement, just sign and be done. But with the help of an advisor who can see the overall picture the addition of a partner can now become a chance to reduce taxes and the ability to reduce risk. If the opportunity presents itself, the business can be restructured to be more tax efficient by adding another business deduction.

Also by reviewing the agreement and making sure it is funded properly with insurance, will reduce the risk. The placement of the insurance should allow the deemed partner's family to be cared for and a relatively smooth continuation of the business with minimal financial impact for the surviving partner.

The process a Certified Financial Planner would perform involves six distinct steps for every financial plan. Essentially they are:

1. Letter of engagement - explains outlining services and sets
expectations.

2. Gather client data to determine goals and expectations.

3. Clarify present financial status and identify any problem areas and opportunities.

4. Develop and present financial plan.

5. Implement the necessary steps to provide solutions.

6. Monitor, re-evaluate, and review the plan on a regular basis.

These steps are needed to help individuals achieve their financial objectives, but a business owner requires more.

A process better defined for you, the business owner, would include the following:

1. The initial meeting or meetings should explore whether the advisors approach is a good fit for your situation. Questions about your financial goals and what is important in life to you should be discussed. If both parties agree to proceed, a letter of engagement outlining the whole process including what is expected of the advisor and client should be discussed and signed.

2. The next step is to set financial goals (both short and long term) for the business and personal situations.

3. Documenting your current business and personal situation has to be done for planning and to help bench mark overall progress.

4. Comprehensive review of all information relevant to your personal and business finances must be done to thoroughly understand your situation. This involves looking at your investment statements, tax returns, financial statements, copy of wills, insurance policies, Investment Policy statements, business plan, etc.

5. A map that plots all issues, which have been addressed, needs to be made to help guide you towards your future goals.

6. An overall plan or strategy is required, based on the analysis that was performed to help tackle complex issues.

7. The advisor should assist with the implementation process to ensure the recommendations occur in a logical and practical order.

8. Since the financial issues can be complex, the advisor has to be able to work with lawyers and accountants as required and be able to communicate with the professionals that are needed.

9. Financial information should be organized and readily available at one central source.

10. Reviewing your financial situation must be done at least once a year or as required in light of changes to tax legislation, economic conditions, inflation, and related issues, in order to keep current.

If the process is done correctly and extensively, the business owner should be financially stronger and able to handle unforeseen events better.

. . .
About the author
Steven Krueger, CFP, is a Financial Planning Advisor with Assante Financial Management Ltd. He can be reached at 1-877-837-3377 or 306-682-2240, or click to email Steven Krueger.

Disclaimer
Please contact a professional advisor to discuss your particular circumstances prior to acting on the information above. The opinions expressed are those of the author and not necessarily those of Assante Financial Management Ltd.

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