A Bird's-Eye View on Small Business

Courtney Williams never expected to tell anyone to sell the family farm. But when one of her private wealth clients did so, it was with her blessing.

The client, who had closed down his distribution business after getting an offer to rent the building, hit a rough patch when the tenant broke the lease. Without the rental income to supplement his retirement, he'd been siphoning income from a line of credit that was now in need of being shored up.

A decision was made: a portion of the family's farm land, which was owned free and clear, would be liquidated.

As the advisor for her client's business interests as well as his personal holdings, Williams, vice president of private client services at Avenue Bank in Nashville, Tenn., had enough information to know that selling the farm land was the right choice.

"That's all in the relationship of having both the consumer and the commercial side of their business," Williams says.

More wealth managers are looking to develop this kind of breadth. While some advisers partner with outside professionals to provide expertise for small-business owners, others are instead asking their own firms for more training, so that they might learn the basics of an S corporation, for example, or delve into the nuances of tax implications specific to businesses. Sophie Schmitt, senior analyst with the wealth management division of Aite Group in Boston, says there "aren't enough advisers who understand the challenges of the small business side and who are really able to help." But those who are can offer a unique perspective—be it on refinancing a troubled loan or drawing up a divestiture plan for a family business.

Williams has no cut-and-dried methods, and no edicts, for balancing the personal with the commercial. Her approach is more open-ended. "I don't tell them what to do," she says. Instead, she asks pointed questions framed around scenarios in which there are never enough resources. "I turn it into, 'What are you guys willing to give up on the personal side to increase the cash flow and have cash reserves for the business?'"

Handling small-business owners' affairs requires special dexterity. Their financial set-up is unique, sometimes because their business interests involve family, and almost always because their companies have been nurtured directly by a single investor: themselves.

Jeffrey Getty, a Pittsburgh-based senior wealth specialist in business advisory services for KeyBank, often works with business owners as they consider an exit plan. For the client, sometimes it means finding an outside buyer and retiring. Other times, it means structuring a solution that allows family members to inherit and run the business.

The choice may ultimately be a business decision, but, says Getty, a personal element is always involved. "I don't ever tend to split the personal and business financial worlds because they're so intertwined for small businesses," he says. "We often use the phrase 'family financial enterprise' when talking with clients because it's almost impossible to separate the two. And when I meet with a new client I try to get them on board with that psychological view."

Initial meetings with new clients frequently focus on cash flow, with Getty aiming to ascertain how much money a client would be comfortable taking out of the business (in order to build the personal wealth side of the ledger and have more assets that can be protected for the future). Usually there's also an open dialogue about family concerns. When a husband runs a business, Getty brings the wife in early to these conversations, along with children or grandchildren when appropriate.