The SBA and Nationwide Financial say advisors can help.

Small business owners are alarmingly unclear when it comes to understanding their retirement plan responsibilities and options, according to the findings of new research from the Small Business Administration and Nationwide Financial. To help owners figure out their requirements and options, the organizations have just published a new primer on retirement plans that also gives a major plug to the kind of assistance investment advisors can provide.

The primer is part of a national education campaign the SBA and Nationwide are spearheading to address the shortfalls in retirement plan knowledge that their research shows plague small business owners. "Many small business owners are unaware of their legal responsibilities and are at risk both personally and professionally," W.G. Jurgensen, CEO of Nationwide Financial in Columbus, Ohio, told reporters at a joint SBA-Nationwide lunch held in Washington, D.C., in December. Executives from both organizations used the event to unveil their new "Guide to Retirement Plan Management," which highlights retirement plan basics, including plan options and owners' fiduciary responsibilities.

The new guide (available at also gives pointers for choosing a qualified professional who owners can use to help them navigate the regulatory landscape and to ensure they are meeting their responsibilities and making educated plan choices.

"You know the old saying, 'Knowledge is power?"' SBA Administrator Hector Barreto told Financial Advisor. "What we want this guide to do is turn the light bulb on for small business owners so they can say, 'I didn't know I could ask for help, or what a professional's experience is or how he or she is compensated.'"

Barreto knows small business owners' concerns firsthand as the former owner of an employee benefits firm specializing in small business needs. He says that owners often want to offer a plan, but are so busy running their businesses that they don't have time to find out basic information about plan options and opportunities. Furnishing them with that knowledge is becoming more vital, considering the "pension gap" at small businesses, where only 28% of employees participate in an employment-based retirement plan, compared with 58% of employees at mid- and large-sized firms. That's according to the Employee Benefit Research Institute, a nonprofit public policy research organization in Washington, D.C. Here's a possible bellwether of things to come: Just 7% of small businesses say they want to start a plan soon, down from 17% just two years ago.

"I think what stops owners is that sometimes they are fearful and think they have to be experts in everything. Our goal is to demystify the process," Barreto says. That's an important goal, considering the findings of the SBA/Nationwide research, which confirm the worst fears officials and advisors have about small business owners' understanding of their plan responsibilities.

Barreto says the findings are not surprising. "Many owners truly don't know what they don't know, and that's what we're trying to change," the SBA official says.

How confused are small business owners? When asked who their plans' primary fiduciary is, more than 40% of owners surveyed answered incorrectly. Instead of naming themselves, owners named investment providers, financial professionals or even employees. Ironically, four out of five owners claim they feel comfortable that their retirement plan's legal and fiduciary responsibilities are being met.

When it comes to instituting a regulatory and risk management plan of any kind, small business owners also leave themselves out to dry. More than 40% do not have investment policy statements in place, and even fewer reported having a formal process to evaluate investment selections on a regular basis.

Looking closely at how employers view or maybe even ignore these concepts can provide a window of opportunity for advisors, says Christopher Van Slyke, a CFP certificant and the principal of Capital Financial Advisors Inc. in Los Angeles. Van Slyke manages the assets of about 75 small business retirement plans and says he gets about a third of his new clients from talking to small business owners about missed retirement plan opportunities. "It's interesting what you see in their investment accounts. They typically open a brokerage account and put it on autopilot and think someone else is managing it. When you start explaining their responsibilities to them and they think in terms of their own money being run in this random fashion, it begins to make sense to them to have someone else manage it for them."