Have you ever been totally wrong about something? Had a long-held belief or thought pattern turned completely upside down, causing you to pause and reassess? It’s happened to me more than once; the most recent eye-opener involved, of all things, retirement.

Like other “aha” moments, it came unexpectedly and in an unforeseen way. We were out to dinner with a group of friends and sat across from a couple we had known for some time. After some little chit-chat and some awkward silences, I did the unthinkable.  I asked a multi-level marketing person why she started her business.  In her quiet and reserved voice she politely shared, “To meet people.”  I’m not sure how I looked when she responded, but mentally I was dumbfounded.  Since I had always assumed network marketing was all about money and get-rich-quick schemes, I couldn’t help blurting out, “What do you mean?” 

It turns out she started her business soon after she retired and had just remarried.  She was in a new city, away from family and friends, and looking for ways to meet new people.  She told me that she doesn’t attend all the “rah-rah” meetings because she’s not really interested in becoming a top producer or signing up hundreds of people below her.  She likes keeping busy during Michigan’s long, cold winter, and since she already used and liked many of her company’s beauty products, she figured, “Why not sell them and supplement my retirement income?”   

She didn’t ask me to join the cult, never offered a sample of her lotions or lip balm, has yet to invite me to a so-called business meeting or threatened to “pop by” with her latest catalog. The brief experience did, however, put me in a quandary.  First of all, she completely dispelled my perception of the motives that drive multi-level marketers, which left me wondering how other baby boomers, like her, are changing and altering industries with similar business models.  More profound though, was the realization that she personified a solution to what I see as some of the most pressing issues facing new retirees.  Entrepreneurship, exemplified by this woman’s business, not only addresses financial aspects of retirement it can ameliorate a host of mental, social and physical issues that traditional retirement planning fails to deal with.

As a former social worker turned financial advisor, I frequently discuss the mental, social and physical components that I believe are crucial to any retirement plan.  Retirement transition issues including a need to replace one’s work identity, find a passion, fill time meaningfully, stay connected to family and friends, and remain mentally sharp and physically fit.  I’ve spent years developing tools and resources to solve this laundry list of needs, but I never anticipated that helping retired people start a business would wind up in that toolbox. 

Not only has my friend successfully replaced her work identity with a new business role, she supplements her retirement savings, stays in touch with friends and family, and has accomplished her main goal of meeting new people.  She keeps physically active by walking door-to-door and by moving and organizing her supplies, which fills her newfound time and keeps her mentally engaged.  Furthermore, she does it part time (even somewhat seasonally) and didn’t need to make a large withdrawal from her nest egg to get started. The business provides tax deductions, including travel to sales conventions, which she and her husband use as getaways to places on their travel bucket list.

One caveat, however: This particular experience has not resulted in my ringing endorsement for the entire multi-level or home-based business industry.  I haven’t started my own multi-level marketing company; nor do I ask clients to refer six friends, who, in turn, can refer six friends and we’ll all get rich.  It has, though, contributed to what I see as a major shift in retirement planning: a trend where the concept of entrepreneurship can be used as an alternative asset class and source of retirement income.

 

As a result, I have been testing a new workshop I call 50+ Entrepreneurship and Starting A Business For Retirement Income.  Both have been well-attended and put me in front of new prospects on a regular basis.  Attendees range from those who are behind in savings and looking for a way to catch up to bored, former small business owners that miss their old role and responsibilities. Some come with a particular business in mind; others aren’t sure yet what exactly they want to do.  In almost every case, they simply don’t know who to turn to or trust.  That’s monumental for advisors to recognize and the primary reason I suggest more financial professionals seek tools and resources to take on the role of teacher, educators and information provider.  It fosters trust:  Exactly what we all seek and what serves as the foundation for all relationships.

Teaching people the steps and benefits of business ownership can provide a new purpose or mission to their life, a way to fill time meaningfully and stay relevant to name a few. Furthermore, entrepreneurship done right can serve as a supplemental source of income and provides a level of diversification few advisors understand, let alone use… including myself at one point.  I can safely share with you that I have been a major proponent of Modern Portfolio Theory (MPT) since I started in this business, and used it extensively in the construction and monitoring of client portfolios.  However, all of that changed several years ago when I was courting a wealthy 75 year-old businessman.  As I reviewed his portfolio, pointing out its lack of diversification into areas such as small-cap, mid-cap and international holdings, he stopped in my tracks, politely admonishing me by saying, “Bob, I didn’t accumulate my wealth through the stock market and I don’t plan on changing what’s worked for me so far.”  He explained that, by owning his own business and shares of other local businesses, he had both created a legacy for his family and protected a portion of his portfolio from Wall Street crashes. Hard to argue the case for MPT with a guy worth tens of millions.

As it turns out, his advice on entrepreneurship can not only serve as a very useful reduction to traditional market risk but as a very engaging and useful conversation with clients and prospects.  In both my workshops and conversations with existing clients, they like hearing that income from a small business can help offset market crashes, as well as possible future reductions to Social Security … not to mention help fill gaps created by an underfunded pension program.  With asset-class correlations increasing, changes eventually coming to Social Security, and pensions nearly extinct, advisors can help retirees be personally and financially proactive in finding ways to supplement any future income losses.

In a previous column, I wrote about several retirement recommendations that clients want to hear, one of which was the benefits of turning a passion or hobby into an income source in retirement.  Reality is, many baby boomers are sick of the 9 to 5 routine, want to have a broader impact on society, and may not be able to save enough money to sit around and do nothing for 20 to 30 years.  The challenge, of course, is knowing who to turn to, which is exactly where advisors fit in.  Let’s face it, we are perfectly positioned to help out in this because we are not only business owners, but also often work closely with other small business owners in a variety of fields and areas of interest.  Furthermore, we excel in objectively looking at and assessing information, understand the role of business factors such as marketing, and are conscious of cost controls, processes and efficiencies. 

Despite our in-depth knowledge and experience, the starting point and needs for many are very basic.  A lot of perceptions about what it means to be an entrepreneur are outdated, particularly as it pertains to retirees. The tendency is to think of business owners as people who have it all together, with every detail planned out, and who are born with a blazing desire to execute their plan even in the face of adversity. These almost superhero-like images can make starting and owning a business seem daunting and out of reach for ordinary folks. But that’s simply not the case.

An entrepreneur can be a retired nurse who now teaches CPR. It’s a widow who rents a spare room to a student; a former auto worker who opens a small engine repair shop; the founder of a new not-for-profit that seeks a cure for an afflicted family member; a travel blogger promoting a personally created photo tour book; a former marketing executive teaching adult education classes for those starting a business; or the multi-level marketing consultant selling health and beauty products that cleared up her complexion or helped her lose weight.

Entrepreneurship as a new asset class or source of retirement income is a win-win for everyone.  Boomers have a need and interest in the topic and love coming together to learn and share ideas, while advisors have the knowledge and expertise to help.  The result provides both personal and financial benefits: income, diversification, and a way to replace a work identity and stay connected and active.  It just may be the best-kept retirement secret for both clients and savvy advisors.    

Robert Laura is the creator of the Retirement Wellness Report, co-founder of RetirementProject.org, and author of Naked Retirement. He can be reached at [email protected].  Please connect with him on LinkedIn and follow him on Twitter @robertlaura.