When selling a business, you need three types of advisors working together: a transaction attorney (to negotiate and draft the purchase agreement), a CPA with M&A and tax experience (to model the tax impact and structure the deal), and a financial advisor (to build the retirement income plan around the proceeds, coordinate tax strategy with the deal structure, and manage the transition from business owner to investor). A generalist financial advisor who handles 401(k)s is rarely equipped for this role, you need someone with specific experience in liquidity events.
Most business owners are surprised to discover how many advisors a business sale requires, and how poorly those advisors coordinate with each other by default. The transaction attorney is focused on the purchase agreement. The CPA is focused on the tax return. Neither is responsible for your long-term financial plan. Without a coordinating financial advisor, important decisions fall through the cracks.
The financial advisor's role in a business sale is distinct from their role in ongoing portfolio management. Before closing, they coordinate with your CPA to ensure the deal structure, purchase price allocation, and any pre-sale strategies (CRT, installment sale, QOZ, gifting) are aligned with your long-term plan. At closing, they manage the placement and deployment of proceeds. After closing, they build and implement the retirement income plan.
The word 'fiduciary' matters here. A fiduciary is legally and ethically obligated to act in your best interest, not their own. A non-advisor (including most broker-dealers and insurance agents) operates under a 'suitability' standard, which means they can recommend products that are suitable but not necessarily best for you. In a liquidity event involving millions of dollars, the difference between fiduciary and non-advice can be significant.
An advisor who earns commissions on the products they recommend has an inherent conflict of interest. After a business sale, you're an attractive prospect for commissioned insurance and investment products. A fee-only advisor, paid directly by you, not by product commissions, gives you advice that's aligned with your outcome, not their compensation.
Key facts
- Fiduciary standard: legally required to act in the client's best interest; must disclose all conflicts of interest
- Suitability standard: product need only be 'suitable', not necessarily in the client's best interest
- RIA (Registered Investment Advisor): SEC or state-registered; fiduciary standard applies
- Broker-dealer: historically governed by suitability standard, though some now operate under Reg BI
- Fee-only advisor: compensated directly by client fees; earns no commissions on product sales
What questions should I ask a financial advisor before a business sale?
Ask: Are you a fiduciary, always? How are you compensated, do you earn commissions on anything you recommend? Have you specifically worked with business owners through a liquidity event? Can you coordinate directly with my CPA and transaction attorney? What is your process in the first 90 days after a sale? These questions surface conflicts of interest and relevant experience quickly.
Do I need an M&A advisor or investment banker to sell my business?
For businesses with revenue above $3-5 million, an investment banker or M&A advisor typically adds value by running a competitive sale process, identifying buyers, and negotiating price. Their fee (typically 3-10% of deal value, depending on size) is usually more than offset by the higher price they achieve. For smaller businesses, a business broker may serve the same function at lower cost. Neither replaces the need for a financial advisor to manage the proceeds and retirement plan.
