How Financial Professionals Fail Small Businesses - Part I

Earlier this week, I presented the above topic at the Conference for African American Financial Professionals. Many people requested my slides, however, 90% of the content was delivered verbally, so I decided to write this article to highlight my talking points. My hope that it will help those in the financial services industry understand what our needs are.

Let me start off by stating, I am not in the Financial Services industry. I am a recovering corporate executive with a Logistics and Supply Chain background, one-time entrepreneur, and soon-to-be owner of my family's electronics manufacturing company. Throughout my most recent tenure at the family business, I've been pitched scores of services pertaining to financial management services from various professionals ranging from accounting, health insurance, general liability insurance, life insurance, bookkeeping, tax, and more. I've hired and fired my share of service professionals. I also exchange information regularly with fellow business owners and CEOs through my board and professional affiliations. We all have the same general consensus about the industry. One that is not widely known or discussed.

My goal is to give you, the Financial Professional, a fly-on-the-wall perspective of what is being said behind your back. Because I didn't want you to feel that my statements were mere conjecture, I researched the industry and surveyed several business owners and CEOs to back up each point. You will see both quotes and data throughout the article.

32% of small businesses are financed with cash, 13% are financed with 401k business financing.

According to Guidant Financial, 32% of small businesses are financed with cash and 13% are financed with 401k business financing. Guidant also reports that the top issue facing small business owners is lack of capital/cash flow. Other issues include time management, administrative work (bookkeeping, payroll, etc.), and managing/providing benefits. There is an obvious need for support, yet only 10% of small business owners outsource bookkeeping, 17% outsource accounting to a CPA, and 15% outsource payroll.

We lead an extremely busy life of trying to balance day-to-day decision making with scaling our businesses and trying to identify strong partners to help support our businesses. When business owners gather, generally we talk about business. We oftentimes share resources and recommendations. When it comes to financial services, our complaints are all the same. Here are a few of the majors:

No Alignment

"I received a letter from my benefits provider REMINDING me to file Form 8889 HSA filing. I forwarded it to my accountant who had no clue that we even had an HSA. I had an HSA for over 5 years and no one ever told my accountant, nor did we know that we needed to tell him."

When a service provider plugs itself into an existing company structure, it needs to know and understand how to align itself with the other service providers. When the HSA (above) was introduced, the benefits provider should have connected with the accountant to communicate that change. How would the business owner know otherwise to do so? All changes in business have a ripple effect. A good service provider understands those ripples and where there is a crossover. As small business owners, we do not have the bandwidth to manage across all of our service providers. We expect you to work in concert with one another. We hire you because you are specialists. If we have to manage the details, one of us is unnecessary.

You are More Focused on Selling Products Than Meeting My Needs

Are you seen as a salesperson or an advisor? Here is a hint, if we duck your calls, we see you as a salesperson and we definitely do not trust you.

If another person comes to my office trying to sell me Keyman Insurance, I think might die. Keyman Insurance is not a panacea for all businesses, there are other instruments. At my company, we write six-figure checks for health insurance, we also write checks for general liability, life, AD&D insurance, and more. I don't need to write another check for anything that doesn't give me access to the money if it isn't used. I am fully aware of other instruments that give me just that. When you walk into my office offering Keyman, I look at you as a rookie.

“Sometimes depending on who you are dealing with they may not always be offering exactly what is the win/win solution - You have to keep them honest and continually shop them. I've found this to be a necessary evil, even with long time relationships where there is a lot of trust built. It's just a good practice, just like with employees everyone needs to be held accountable.”

It wasn't until we worked with a fee-only service model that we felt that we truly had ADVISORS. Those advisors established trust. From trust, a relationship developed and I confidently recommended the firm to several friends and associates. When you take out the sales instruments and bonus structure out of advisory services, the type of advice that you receive is pure. And once you see the power of a good advisor, the bad ones get smoked out.

“We've received some great information and resources from our insurance brokers about how to build a culture of safety and how be proactive and avoid potential claims and also how to manage damage control. Again, you have to sift through the b.s. and consistently be speaking with other professionals because at the end of the day they make their money on us.”

Only Time I Hear From You is During My Renewal Period

With the current administration, tax changes, new products, and other goings-on, why do you only connect during the renewal period?

Now, I don't want you coming by randomly to say hello or dropping me a line in my already crowded inbox, but what I do want you to do is keep me abreast of what is going on in the industry and how it affects me and my business.

Your CRM system should be segmented by industry, business size, business type (MBE, woman-owned, veteran-owned), goals (close to retirement, college-aged children, succession planning), etc. You should then take current and relevant information and create content based upon customer need. We will then READ your newsletters and emails because the information pertains specifically to where we are in our lives and businesses. Your open and share rates for your communiqué will dramatically increase because you are providing VALUE. And value is what differentiates one advisor from the next.

And if a better plan becomes available outside of my renewal period, I still want to know about it. Don't wait until the last minute. We hate when you come to our offices after Thanksgiving wanting us to sign papers. 'Tis the season for not being stressed over rate increases and service decreases.

Note that when you ghost us eleven out of twelve months of the year, we feel as though you take our business for granted. Don't think that longevity is an indication of satisfaction.

I’m Coming to YOU with Industry Information

Many business owners are in CEO groups, industry partnerships, clubs, etc. We talk to one another about things related to our businesses. If I am consistently coming to you with industry information, I have an issue.

“None of them are particularly proactive. If I don't ask, I don't know.”

I found out that Opportunity Zones are great for family businesses, due to the fact that the owners plan on being in business for more than 7 years. This year is the year to move the business to an OZ if I plan on getting the full advantage. I had to learn about this through my fellow business owner. I wasn't ADVISED elsewhere.

“Don’t have me embarrassed in my circles because your network is raggedy.”

I also found out that I could "rinse" my kids' K-12 tuition payment through their PA529 account in order to take advantage of a tax credit. I figured it out after reading an article online.

YOU are the Specialist.

YOU are a topical expert.

I am busy running my business. I need YOU to advise me. Not the other way around.

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Due to the length of this article, I decided to break it apart into two separate articles. Here is Part II.

Let me know your thoughts so far (below). Or, if you think others could benefit, please share.