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.

 

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