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IMO, this is a quite personal question and the an-
swer will vary based on individual circumstance
(stage of life, size of nest-egg, appetite for risk
etc). There are a couple of broad themes though
I would say, having done it personally (albeit no
creating a start-up but joining one early-stage):
1. Be prepared and willing (mentally, emotionally)
to take significant cash compensation cuts (the
simple equation: Trade in “Less risky” cash at bigco
for “more risky” equity at startupco).
2. Be at peace with your personal finance situation
(i.e., is are your individual and personal financial
goals for the “medium-term” secure even if start-
upco goes belly-up. Do you have a balance sheet
that can weather the storm? Do you have a sup-
portive, working spouse? Do you need to tighten
your belt and reduce your personal “burn” in order
to make #1 work, etc?)
The specifics of the above (what is “medium-term”,
what is “secure” mean to you etc) depend, as I said,
on individual circumstances and risk-appetites.
Additionally, if you are looking to go leave a bigco
and do a startup from scratch then there is quite a
bit of risk-mitigation one can do by actively think-
ing through/ designing/ potentially even building
pieces of what will be your future start-up in your
spare time on your own resources (there are some
IP ownership risk implications here depending on
where you live and for whom you work, what con-
tracts you have signed with your current employer
etc. and would be good to get some legal advice
here before going too far).
Only thing I would add is try to avoid doing some-
thing because you are frustrated in the current sit-
uation. As someone said, “today’s frustrations are
a poor chisel for tomorrow’s future”. Do it because
you have incessant hunger in your belly and a vi-
sion for the future that you think no one else has
(and that you truly believe you can make happen
together with other like-minded individuals)... the
rest is the journey. Enjoy the ride.
- Karthik Hariharan
What’s the difference between a financial
planner, a financial advisor, and a
wealth manager?
How do people financially manage to
leave a big company and create a startup?
The term financial advisor is often used as a generic
term to describe providers of financial or invest-
ment services. You may hear a financial planner
or wealth manager referred to as a financial advi-
sor. For instance, “Jane at XYZ Wealth Manage-
ment is my financial advisor.” Additionally, some
brokerage firms assign the title Financial Advisor
to their representatives. Because of this, brokers
are commonly referred to as financial advisors.
A financial planner advises on all things related to
personal finance including budgeting, debt, estate
planning, education savings, retirement planning,
employee benefits, tax planning, insurance and
investments. The most prevalent professional
designation in the financial planning field is the
Certified Financial Planner (CFP). You will typically
see the initials CFP (or the CPA equivalent PFS) next
to a financial planner’s name. It bears mentioning
that a designation is not required to provide plan-
ning services. Also, not all individuals holding the
designation provide financial planning services.
Someone who provides comprehensive, ongo-
ing financial planning services combined with
investment management is a wealth manager.
You may often see the term advisor in a profes-
sional’s title or their firm name. Ideally, the terms
manager and advisor would signify an important
distinction about the way professionals work
with their clients. A manager has discretionary
trading authority over client accounts and therefore
does not need client approval before trading. An
advisor is someone who makes recommenda-
tions to their client, but the client must approve
the implementation of the recommendation.
As someone who guides individual investors
in the San Francisco Bay Area through the pro-
cess of finding the right financial professional
to serve their needs, I find that these terms are
often used interchangeably, creating confu-
sion. As a result, I categorize practitioners by the
services they provide, rather than what they call
themselves, using the following guidelines.
Investment Manager – Discretionary Trad-
ing Authority over Investments*
Investment Advisor – Makes Recommendations
and Executes Trades with Client Approval*
Wealth Manager – Combines Comprehensive Fi-
nancial Planning with Investment Management
Wealth Advisor – Combines Comprehensive Finan-
cial Planning and Investment Recommendations
*may include limited planning
As for other titles, the term Private may be
placed in front of the title to denote that
the professional works with wealthy cli-
ents, i.e. Private Wealth or Private Client.
- George Perches
