Business owners are potentially a lucrative client base, but they can be a tough nut to crack for financial advisors because many of them like to have control over their finances and they tend to employ different advisors. The key to scoring points in this market, says a study by The Phoenix Companies, is to focus on retirement planning based on the main asset for many business owners--their business.
According to research from Phoenix, a life insurance and annuities company, the market for business owners is ripe with opportunity for advisors. For starters, many in this demographic are loaded: 37% of high-net-worth households are self-employed business owners or partners, and 27% of high-net-worth retirees were business owners. Furthermore, business owners comprise 52% of folks worth at least $5 million.
But advisors who like to be the quarterback of the financial relationship need to be prepared to discuss some of the play calling with business owners--72% of them agreed with a survey statement that they like being involved in the day-to-day management of their financial affairs. Yet 40% of business owners say they don't take the time needed to manage their finances and about one-third of them don't know the best way to invest their money.
When they do turn to others for financial advice, business owners tend to use a wider array of advisors than the general high-net-worth population. That runs the gamut from accountants and full-service brokers to lawyers and fee-based planners. Financial advisors can make inroads by delving deeper into the relationship beyond just investment topics.
"Our research shows that retirement planning is the principal driver" for financial advisors to deepen the engagement with business owners, says Rich Schaeffer, Phoenix's director of strategic business development. "For many of them, their business is their primary asset and they view it as their retirement plan. They want and need to diversify some of that reliance."
Complicating matters is that only 51% of this group say they plan to retire someday. Of course, who knows how they'll feel when they're older, but that's where good retirement planning comes into play, Schaeffer says. "Advisors need to employ traditional and non-traditional strategies to diversify income streams," he notes.
That's particularly the case with family-owned businesses where the trick is employing retirement-planning and income-distribution strategies that benefit the owner and his or her children--both those who are involved and who aren't involved in the business
"Advisors who want to be the primary financial advisor need to go beyond the quantitative issues and deal with the qualitative issues by understanding the dynamics of that family business," Schaeffer says.