When you are working hard to get your business up and running — and keep it that way — some things get left behind. Don’t let one of those things be your finances. If you have some money, whether it be funds saved for future reinvestment in the company or just some cash you’ve been able to take out of the company, it’s important to make it work for you.
One option is managing your own money through a self-directed account. If you are going to do that, make sure you do your homework on the companies you want to invest in, says Pamela McDonald, director of communications and education with the British Columbia Securities Commission. And don’t necessarily listen to social media. There can be some great information on social media, but also lots of misinformation, she says.
Managing your own money minimizes fees you’ll need to pay. But it takes time to do it well — time many business owners just don’t have.
If you don’t have the time, then you may want to work with a financial adviser, a.k.a. a registered investment adviser. Here’s how.
First, understand the difference between a financial planner and a financial adviser. According to Investopedia: “A financial planner is a professional who helps individuals and organizations create a strategy to meet long-term financial goals. Financial advisers fit into a broader category that can include brokers, money managers, insurance agents or bankers.” Do your research and understand which is the best fit for you before trusting one with your money.
It’s also wise to have some idea of your goals and how much risk you’re willing to tolerate before you start.
Financial advisers can be found through banks, financial-services firms and individuals hanging out their own shingles. There are lots of advisers to choose from. So how do you go about finding the right one? Recommendations from people you know are a good starting point, but just remember that the right person for you may not be the same person who is right for your friends or colleagues.
“If you’re going to work with an investment adviser, it’s important that the adviser you’re working with understands you, understands the goals that you have and understands the risk tolerance that you have,” McDonald says.
One of the most important things you should do is to check whether the adviser is registered and what they are registered to sell, McDonald says. Some advisers might be registered to sell only mutual funds, while others might be able to sell mutual funds, stocks and bonds. You can do this at aretheyregistered.ca, a website that lists not only whether an adviser is registered and what they can sell, but also whether they have ever been disciplined by the securities commission or other regulators.
Once you’ve got a few ideas, meet with those advisers and ask questions. Make sure they understand what you are comfortable investing in and that they answer your questions clearly in a way you can understand. If someone can’t answer them in that manner, that adviser may not be a good fit for you.
You need to pay for good advice, McDonald says. “But you need to understand what it is that you’re paying, and how that impacts your overall investment return.”
For example, mutual funds will pay fees to the fund’s manager, who determines what should be in the fund. There are also likely fees to purchase a product, whether it is a mutual fund or a stock or bond. You need to know what these fees are so you know what your share of the return is, McDonald says. “At the end of the day, a six-per-cent return might be three per cent by the time these fees are paid,” she says.
Finding someone you trust is important. But don’t abdicate everything to them, McDonald advises. Take control. Ask questions. And don’t be afraid to fire your adviser if they aren’t working out for you.
Before you do, though, review your contract to understand the exit process and any fees payable. Organize your paperwork and make a plan for your investments. Then, whether you write, email or call them, leave your emotions at the door and keep communication brief and firm.
The B.C. Securities Commission’s InvestRight is a website that has plenty of useful advice about investing, including what to look for in an adviser and what questions to ask. investright.org
Images: Getty
