Financial advisors can open a new avenue for growth by developing an expertise in helping small business owners and entrepreneurs, says Pershing LLC.

Because many small business owners have special needs and may have low investable assets, advisors need to approach them differently than they would traditional clients, according to Pershing, a BNY Mellon company.

Pershing on Wednesday released its latest guidebook, Building a Business with Business Owners. The guidebook outlines how advisors can grow their own business by helping business owners untangle their often complex financial situations.

Because business owners pour much of their money back into the business, they may have little money for traditional investment portfolios. That does not mean they do not need the services of a financial advisor, Pershing says.

However, advisors may be under compensating themselves if they are basing their fees on the amount of assets being managed.

"Offering specialized services to high-net-worth business owners represents an attractive, and potentially lucrative, market opportunity for financial advisors," says Kim Dellarocca, a Pershing director and the global head of segment marketing and practice management.

"Increasingly, we are seeing advisors consulting with entrepreneurs on issues such as cash-flow management, capital allocation and borrowing -- value-added services and advice that generalist financial advisors cannot match," Dellarocca says.

For that reason, Pershing advises financial planners to develop the expertise small business owners need. "For business owners, signing on for these specialized services can be enticing, and can make them more efficient," she adds. "But entrepreneur clients may need to be convinced that the advisors they select are true experts in their businesses, are not over promising and can work effectively with existing service providers."

Financial advisors need to be able to support both business and personal spending needs for the business owner, as well as structuring financing for start-up and expansion. They need insight on insurance products, hedging strategies and legal assistance, according to the guidebook, as well as group health and 401(k) plans, non-qualified retirement plans and insurance benefits.

Because a small business owner probably has intertwined business and personal financial issues, the advisor needs to integrate personal financial planning and business planning, especially in the areas of tax efficiency, liquidity, estate planning and wealth transfer, according to Pershing.

The advisor also needs to help the entrepreneurs align business strategy with the personal life and financial goals of the business owner, including taking into consideration such things as succession planning, business valuation and equity transfer.

Developing an expertise in these areas will enable a financial planner to have a niche market, in addition to the traditional clientele, and will let the advisor differentiate the firm and drive growth, the guidebook says.

At the same time, because the advisor may not be handling a large amount of investments for the business owner, the advisor may need to arrange premium fees for the value-added services in order to offset the added expense of working with entrepreneurs.

A copy of the guidebook can be obtained at www.pershing.com.

-Karen DeMasters