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Financial Adviser Might Be Needed for Growing Firm to Manage Money

Pension funds, cash flow management and high-yielding investments may be of little importance to a small business scrambling to keep its doors open.

But if the business takes off, the owner may find himself unable to cope with managing large sums of money and confused about where to turn for help.

Instead of fretting, it may be time to look for a professional financial adviser. Several types are available, ranging from financial planners who take a big-picture approach to financial strategies to private bankers who usually handle accounts of $1 million or more. In between are asset managers and corporate treasury advisers who deal with specific problems relating to money management.

“A business owner should ask himself if he has the time, willingness and ability to manage his money,” said Alison Winter, president and chief executive of Northern Trust of California. The company is a subsidiary of Northern Trust, a Chicago-based bank holding company that manages or administers $177 billion in assets.

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Winter said her typical small business client has about $500,000 in the bank, a positive cash flow, manageable debts and a vision of where his company is going.

“He’s still wearing multiple hats in the business and has several accounts at the bank, but he is not sure what he wants to do with the money,” said Winter.

She said a company’s pension fund is usually the first large sum of money to be invested. “By the time the pension plan gets to $2 million we are able to give the company a few choices,” said Winter.

Although standard savings accounts or certificates of deposit are safe, they often don’t yield as much as more innovative investments in certain foreign currencies or “Yankee CDs,” which are certificates of deposit issued in dollars by branches and agencies of foreign banks, Winter said.

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“The higher the risk in the business, the more conservatively the pension plan should be managed,” Winter advised. For example, she said a high-technology company with one or two best-selling products should have the most conservative plan, because its success may be short-lived.

In contrast, a stable manufacturing business may want to dabble in riskier, but higher-yielding, investments, she said.

Company officials should also keep track of employees’ retirement ages and make sure the firm has enough money in the pension fund to take care of those who retire, Winter said.

In addition to keeping the money safe and sound, business owners must heed federal regulations governing pension funds. The rules not only require the money to be prudently invested but also prohibit investments that favor or benefit the company owner over his employees. For instance, a person cannot use pension fund money to buy part of his home, even if it is a great investment, Winter explained.

On a more personal note, an asset manager will also provide estate and trust planning. Winter and other advisers said they prefer to work as a team with a business owner’s accountant, tax adviser and attorney to prepare a total financial strategy.

One challenge in working with small business owners is that they are frequently reluctant to allow anyone else to make important decisions. Winter said her job is to offer various scenarios, not to take control of a person’s money.

“It’s his money and he’s got the final decision,” she said. Another type of financial adviser specializes in helping companies increase their cash flow by identifying and solving the problems.

“We wring the towel of a company’s operations to get more cash out of them,” said Charles Rack, president of Treasury Resources Inc. in Century City. “We try to make sure cash isn’t tied up in receivables and operations.”

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Treasury Resources does not provide specific investment advice but works with the company’s owners and financial staff to establish a corporate treasury strategy, Rack said.

“The biggest problem we run into with small business owners is that they usually hire an accountant and he eventually becomes the chief financial officer,” Rack said. This happens even if the person is not truly qualified for the job. And if the person is not qualified to solve the cash flow problems, he frequently feels jealous and threatened by the services and advice Treasury Resources offers.

Once the company decides to hire Rack and his partner Tom Harvey, they meet several times with the owner and his financial staff to become acquainted with the problems. Rack and Harvey usually charge a flat fee for a cash flow analysis and then bill by the hour with fees ranging from $150 to $300, Rack said.

Even if you are not familiar with financial advisers and what they offer, most business owners know someone with a personal or private banker.

“Most of our clients come to us after they have sold their business,” said Shannon Clyne, senior vice president and chief investment officer for Bank of America. “Among our domestic clients, fully two-thirds came to us after they sold a business.”

Clyne’s group helps clients invest in marketable securities, and clients pay a fee based on the market value of their investment portfolio.

Clyne said his staff meets several times with a new client to define his or her financial objectives. After that, they keep in touch by telephone and meet quarterly.

“Some people hire us so they don’t have to pay much attention or be very involved in managing their money,” Clyne said.

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Survey Cites Hot Areas

A new survey in Success magazine predicts that food, child care, housing, leisure, education, health care, recycling, information and marketing will be the hottest growth areas for entrepreneurs in the 1990s. The study, prepared by Forecasting International Ltd. in Arlington, Va., also predicts that by the year 2000, nearly 90% of the work force will work in the service sector.

Grant for Professor

Fred Kiesner, who teaches entrepreneurship and management at Loyola Marymount University, has been awarded a $25,000 grant and an opportunity to teach for a year at the University of Michigan in Ann Arbor.

Kiesner supervises a popular and respected program that enables Loyola business students to help small business owners solve problems. He won the Zell-Lurie Award by developing a new course to teach entrepreneurship. The competition is sponsored by two Chicago entrepreneurs and the University of Michigan.

SBA Winners Named

The Small Business Administration’s new Santa Ana district recently announced the winners of its regional small business competition. Stephen Hess, president of HessCo Industries in La Habra, was named small business person of the year.

Jeffrey Thompson, president, of Western Orient Trading Co. in Mission Viejo, was named exporter of the year. Accountant advocate is David Krajanowski, a certified public accountant from Santa Ana.

The SBA’s financial services advocate is Thomas Hyle, vice president of Sunwest Bank in Santa Ana. Madelon Maupin of Orange County Business First was named media advocate. The minority advocate is Pat Krone, external affairs manager for Pacific Bell, and the women in business advocate is Anne Kimbell Relph, president of Enterprising Woman Inc.


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