Financial advisors for small businesses – essential guide

Discover the essential role of financial advisors in navigating wealth building, business strategies, and financial security.

Our experts

We are a team of writers, experimenters and researchers providing you with the best advice with zero bias or partiality.
Written and reviewed by:

Times are tough for the UK economy, and for small businesses struggling to stay afloat.

With a cost of living crisis still battering the nation, inflation weakening consumer spending, and the ongoing mess of post-Brexit regulations affecting imports, exports, and available labour, it’s been a relentless time for business bottom lines, with the cost of goods sold rising troublingly. 

Recently we covered the UK areas most worried about the cost of living crisis, based on key search terms per area. One growing term around the country as a whole has been for “Financial advisors.

This isn’t only a consumer industry aimed at household financial advice. For small businesses in the UK, financial decisions are a delicate balance that can be the difference between success and failure. Choosing a dependable financial advisor could be a sensible move in these challenging times. But what exactly is a financial advisor, and how can they help?

In this article, we will delve into the realm of financial advisors, their advisory services, and how they have the potential to rescue or bolster your small business.

What is a financial advisor?

Financial advisors are professionals who provide expert guidance on various financial matters to individuals and businesses. Their expertise might cover anything from financial markets to regulations, and from tax codes to investment strategies. 

These advisors can be broadly categorised as independent advisors who work directly with clients, or institutional advisors affiliated with financial firms. They work under the UK’s regulatory framework and adhere to ethical standards in order to deliver reliable advice to their clients.

Benefits of working with a financial advisor

Collaborating with a financial advisor offers several advantages for small businesses, including:

  • Expert advice: access to specialised expertise in financial matters.
  • Time and cost savings: streamlining financial processes, saving both time and money.
  • Risk mitigation: reducing financial risks through strategic planning.
  • Goal achievement: crafting a roadmap to achieve financial objectives.
  • Peace of mind: entrusting financial affairs to professionals.
  • Capital access: advising on avenues for business growth capital.
  • Succession planning: assisting in planning for business continuity.
  • Tax guidance: offering insights into tax planning and compliance.
  • Employee benefits: helping design attractive employee benefit packages.
  • Personalised financial strategies: one of the primary benefits of hiring a financial advisor is their ability to craft customised financial strategies. Each individual and business has unique financial circumstances, goals, risk tolerances, and timelines. A financial advisor takes these individual factors into account to design a comprehensive plan that aligns precisely with your specific needs and aspirations.

Their role typically involves:

  • Developing a financial plan for your business, taking into account your goals, objectives, and risk tolerance.
  • Tracking your financial performance and making adjustments as needed.
  • Providing guidance on financial matters such as budgeting, cash flow management, and investment planning.
  • Helping you to identify and manage risks to your business.

They can also:

  • Differentiate between basic financial tasks and strategic planning: basic financial tasks like bookkeeping and invoicing can be handled in-house. However, strategic financial planning, tax optimisation, and risk mitigation often require specialised knowledge that financial advisors bring to the table.
  • Provide expertise in taxation and compliance: financial advisors specialise in helping businesses understand and comply with tax regulations. They can ensure timely and accurate tax filings, maximising tax efficiency and minimising liabilities. 
  • Facilitate access to funding and capital: financial advisors are pivotal in identifying suitable financing options, from traditional bank loans to alternative funding sources like angel investors or venture capital. They assist with loan applications and investment pitches and help businesses optimise for sustainable growth.
  • Assist with risk management and insurance: unforeseen risks can disrupt business operations and lead to financial turmoil. Financial advisors analyse potential risks, from market volatility to legal liabilities, and recommend appropriate insurance coverage. This proactive approach to risk management can minimise uncertainties and safeguard some of the businesses’ financial stability.

Financial advisor, accounting software – or both?

Accounting software can be a valuable tool for managing day-to-day financial operations, tracking expenses, and generating reports. However, it lacks the personalised advice, strategic planning, and expertise that a financial advisor provides. 

Financial advisors offer insight into complex financial matters, help you set and achieve long-term goals, and provide guidance on navigating the ever-changing financial landscape.

In many cases, using accounting software alongside a financial advisor can be a powerful combination. The software helps you manage the operational aspects of your finances efficiently, while a financial advisor offers tailored strategies and professional advice to optimise your financial decisions. This collaborative approach can provide you with a comprehensive and well-informed financial management strategy.

To learn more about how the top accounting contenders stack up in terms of cost, features, ease of use and customer support, you can check our guide to the best accounting software for small businesses.

Why do businesses need financial advisors?

You may be thinking: why can’t I do this for myself? 

And of course, you can. That’s always an option. 

Small business owners often opt to manage their finances independently to save costs. While this approach is suitable for basic financial tasks, it may lack the depth of expertise needed for strategic financial planning and risk management, however. When doing things for yourself, these are a few potential drawbacks to consider:

Lack of expertise: financial management involves complex concepts, from investment strategies to tax planning. Without the proper knowledge, you might make uninformed decisions that negatively impact your financial health.

Emotional decision-making: emotional biases can influence financial decisions, leading to impulsive actions during market fluctuations. Financial advisors provide an objective perspective that helps you make rational decisions.

Risk of mistakes: while everyone should try to be as financially literate as possible in their lives, DIY-ing your finances increases the risk of making costly mistakes, such as incorrect tax filings and poor investment choices.

Lack of specialised knowledge: complex financial matters often require expertise in areas such as tax planning, estate planning, and retirement strategies. Not having access to this specialised knowledge can lead to missed opportunities.

Legal and regulatory challenges: Financial regulations and tax codes can be intricate and subject to frequent changes. DIY financial management increases the risk of non-compliance or missing out on potential tax benefits.

Higher stress levels: juggling financial responsibilities on your own can increase stress and anxiety, especially during challenging economic times or major life events.

Ultimately, the decision will always be yours – but when it comes to things to perhaps prioritise in your business plan for long-term security – a financial advisor may be a good bet.

Finding the right financial advisor: and what to expect

There are a few key steps to identifying a financial advisor who would be the right fit for your business. 

Step 1: Evaluating business needs

Finding the right financial advisor starts with a clear understanding of your business's financial needs. Whether it's improving cash flow, reducing debt, or preparing for series funding, defining your goals will help narrow down your search.

Engaging a financial advisor becomes indispensable when businesses face complex financial challenges, significant growth opportunities, or regulatory changes. The guidance of a professional can help you and your business navigate these situations with confidence.

When engaging a financial advisor, small businesses can anticipate:

  • Regular meetings: consistent check-ins to review progress and make adjustments.
  • Financial planning: development and adjustment of financial strategies.
  • Investment advice: recommendations tailored to the business's financial goals.
  • Tax planning: strategies to optimise tax efficiency.

Step 2: Research and due diligence

Research is crucial when selecting a financial advisor. Verify their credentials, certifications, and experience in handling businesses of your size and industry. 

In the United Kingdom, financial advice is regulated by the Financial Conduct Authority (FCA). The FCA is the regulatory body responsible for overseeing various financial services and markets, including the conduct of firms providing financial advice and services to consumers. Its main goal is to ensure that financial markets operate in a way that is fair, transparent, and in the best interests of consumers.

Financial advisors in the UK must be authorised and regulated by the FCA to provide financial advice legally. To become authorised, advisors and firms need to meet certain criteria, demonstrate their competency, and comply with regulatory requirements.

Step 3: Compatibility and communication

Effective communication is key to a successful advisor-client relationship. 

In the digital age, financial advisors leverage advanced technology to analyse data and provide data-driven insights. This allows businesses to make informed decisions based on accurate financial information. But while technology can streamline certain aspects of financial management, the personal touch of a human advisor can be invaluable.

A compatible working style and shared values can foster collaboration. Clearly defining expectations, communication channels, and the frequency of updates to ensure a smooth partnership.

Reading client testimonials and reviews can provide insights into their experience, track record and past client satisfaction rates.

“Finfluencers” versus financial advisors

In recent years, more and more businesses have sprung up to challenge the money matters status quo and make finance easy. The rise of finance influencers on platforms like Instagram or TikTok are part of this revolution, transforming the way people consume financial advice and information. These individuals, known as “finfluencers,” have gained immense popularity and have become digital celebrities in their own right. 

Using social media, they share relatable stories, practical tips, and simplified explanations to make complex financial topics more approachable. 

Online financial influencers can be a great source of inspiration when it comes to managing your finances and making informed money-related decisions. They often share valuable insights, tips, and general financial knowledge that can help you navigate the complex world of personal and business finance. 

However, it's important to remember that while they can provide general guidance and ideas, they aren't authorised to give direct financial advice to specific individuals or businesses unless they hold the necessary accreditations. This is why you'll often find a disclaimer on their social media profiles, blogs, and websites proclaiming, “this is not financial advice”. 

So, take their advice as a starting point, but always consider consulting with qualified experts before making significant financial decisions.

See: The top 10 “finfluencers” making a fortune in 2024

How much does a financial advisor cost for small businesses?

We know that you don’t want any more costs, but the long-term financial benefits of hiring a financial advisor can far outweigh the expense. 

Advisors typically charge fees based on a percentage of assets managed, hourly rates, or a fixed fee for specific services. 

It's essential to consider these costs in the context of the potential benefits they bring – because proper financial planning, risk management, and access to strategic advice can lead to improved profitability and sustained growth. 

You will know the value of your financial advisor by comparing improved financial performance, reduced tax liabilities, and increased access to funding against the advisory costs.

What affects the cost of a financial advisor?

The cost can be influenced by:

  • Business size and complexity: larger and more complex businesses may require more extensive services.
  • Service scope: the range of financial services required.
  • Advisor experience: the advisor's level of expertise and track record.
  • Advisor location: regional variations in costs can be common.

Conclusion

Financial advisors play a crucial role in the journey of small UK businesses toward success. From crafting customised strategies to managing risks and navigating complex regulations, their expertise provides invaluable support. 

As businesses consider the costs of hiring advisors, it's important to recognise the potential for sustained growth, risk mitigation, and financial success that these partnerships can offer. 

Ultimately, the decision to engage a financial advisor is an investment in the future of the business, fostering stability, growth, and prosperity.

Frequently Asked Questions
  • Is it worth paying for a financial advisor?
    Yes, paying for a financial advisor can provide valuable expertise and guidance in managing your business finances effectively.
  • What can financial advisors help business owners with?
    Financial advisors can assist business owners with tasks such as financial planning, investment guidance, risk management, tax planning, and employee benefits planning.
  • How much does a business financial advisor cost?
    The cost of a business financial advisor varies based on factors like experience and services offered, with an average of around £1,500 per year for small businesses.
Written by:
Stephanie Lennox is the resident funding & finance expert at Startups: A successful startup founder in her own right, 2x bestselling author and business strategist, she covers everything from business grants and loans to venture capital and angel investing. With over 14 years of hands-on experience in the startup industry, Stephanie is passionate about how business owners can not only survive but thrive in the face of turbulent financial times and economic crises. With a background in media, publishing, finance and sales psychology, and an education at Oxford University, Stephanie has been featured on all things 'entrepreneur' in such prominent media outlets as The Bookseller, The Guardian, TimeOut, The Southbank Centre and ITV News, as well as several other national publications.

Leave a comment

Leave a reply

We value your comments but kindly requests all posts are on topic, constructive and respectful. Please review our commenting policy.

Back to Top