Top stocks to invest in – How to Advise Entrepreneur Clients



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When Barbara Roberts discusses the dilemmas facing entrepreneurs, it makes sense to listen.

Though Roberts has worn many hats during her long career, that of an entrepreneur is the one closest to her heart. Not only has she started, managed, and sold several businesses, she has also spent many years consulting with entrepreneurs — helping them manage their wealth and, sometimes, the sale of their companies.

In one of her early business ventures, Roberts lead the transformation of FPG International from a staid stock photography agency to a world-renowned and state-of-the-art company, with revenue more than six-times greater than when she first took over. She sold the company in 1997 for $60 million in cash.

Currently the entrepreneur in residence at Columbia Business School, Roberts is also one of the leaders of Tiger 21, a peer-learning group for entrepreneurs who have sold businesses for $10 million or more.


Roberts shared the lessons she has learned in her over 20 years as an entrepreneur and entrepreneur adviser at the CFA Institute Alpha and Gender Diversity: The Competitive Edge conference. She focused on what she calls “the owner’s journey,” specifically the issues owner-entrepreneurs must navigate in managing their wealth. Roberts said that advisers need to be aware of these unique challenges and prepare for them accordingly.

Research indicates that many ultra-wealthy people in the United States grew up poor or middle class, Roberts observed. They need to learn about asset allocation, benchmarks, who to trust with their wealth, and what financial values to maintain. Advisers can serve these clients by focusing on those needs.

Roberts’s own research in “The Owner’s Journey” provides a road map for entrepreneurs looking to transfer or sell a business. She explained that there are a number of potential outcomes, including an initial public offering (IPO), selling to a strategic buyer, selling to a financial buyer, transferring to a family member or a partner, or bankruptcy or liquidation. Owner-entrepreneurs need to stay focused on where the business is going, while advisers need to concentrate on potential exit strategies and discuss them with their clients.

Companies can grow large “without analyzing the numbers,” Roberts noted. In her experience, most entrepreneurs went into business for specific reasons: to make a difference, fix a problem, create something new, or to act on an insight — not necessarily to get rich. Thus, most entrepreneurs are “risk controllers” not “risk takers.” So investment advisers must help entrepreneurs attain a full picture of their financial situation, while also analyzing and managing their risk.

When dealing with entrepreneur clients who may want to sell their companies, advisers need to make it clear that profits and cash flow are the bottom line. Some clients may not have this on their minds, particularly when they are focused on day-to-day operations or the company’s mission.

Many entrepreneurs hope to transfer their business to a family member. The best way to prepare for that, Roberts said, is to encourage clients to bring their children in early and acclimate them to the idea and the responsibilities.

Some entrepreneurs, on the other hand, act as though they will run their business forever and never do any transfer planning. This approach has obvious drawbacks. Financial advisers should work with their entrepreneur clients to make sure a succession plan is in place.

Roberts’s white paper, “Life After an Exit: How Entrepreneurs Transition to the Next Stage,” deals with what clients do after the sale of their business. She interviewed 25 entrepreneurs who sold their companies for between $10 million and $1 billion, focusing on what happened following the sale and how each learned to manage their wealth.

She found that after selling, many former business owners fall into a depression. Their work provided them with a community, structured their time, and gave them a reason to get out of bed each day. It can be hard to adjust when they no longer have all that. Advisers should be mindful of the potential for such post-sale angst.

Some final words of advice from Roberts:

  • For advisers: Consider having your entrepreneur-clients meet each other for support and to share ideas. Know your entrepreneur’s family.
  • For entrepreneurs: Make sure your company is always ready for sale. Put things in writing. List your three main goals for the next 12 months, and work to create value.  Value often comes from building something that is the biggest, boldest, broadest, or the best.
  • And one last tip for everyone: Don’t be afraid to fail. The best things can come out of the worst adversity. Don’t be afraid to think like a five-year-old with a musical instrument: Sometimes you just have to try it, so go ahead and do it.

Barbara Roberts will be giving a presentation on ways that wealth management professionals can work with entrepreneurs at the upcoming Wealth Management 2017 Conference in Nashville, Tennessee, on 7–8 March.  

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©Getty Images/OstapenkoOlena

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