Needs Color Interest In Products
Another important aspect of dealing effectively with small business owners is understanding any perceptions and preconceived notions about specific financial products. When asked, they express great interest in credit, investments, asset protection, retirement planning and cash management-all products and services that address their current business needs. Not surprisingly, things such as estate planning, trust services and life insurance get very little interest, in part because they address long-term issues and take a back seat to more pressing day-to-day issues, and also because it's not the services themselves that draw attention, but the benefits each service can deliver.
Business Owners As Clients
The best methods of accessing affluent business owners are no different than the best methods to access the broader universe of private wealth, and that is through centers of influence-other professional advisors to the wealthy such as accountants and tax attorneys-and through current satisfied clients. Business owners who participated in the research survey were asked how they found their primary advisor: 63.3% cited a center of influence and 24.1% said they were referred by another client of the advisor. Although other methods were identified in the survey, it is essential to realize that centers of influence and clients account for nearly 90% of all referrals and overshadow other marketing activities in effectiveness.
Today, only 31.1% of small business owners characterize themselves as very satisfied with their primary advisory relationship. This is meaningful for a number of reasons. Most obvious is that the 68.9% that are dissatisfied or moderately satisfied will more readily consider working with another advisor, and will eventually take their business elsewhere if things don't change. There is also a negative multiplier effect to having dissatisfied clients. Research clearly shows that a client must have a high level of satisfaction before they will refer a friend, family member or colleague. So, the longer mediocre client relationships are sustained without improvement, the smaller the pool of potential referral sources becomes.
Summarizing The Opportunities
Small business owners represent that greatest potential for growth and wealth in America today. Historically, they have been a lucrative and complex client for advisors and will remain so, given the sophisticated tax and estate planning strategies required to manage liquidity events. What follows is a short list of considerations based on the aforementioned data for any advisor currently working with or targeting small business owners:
Freezing the current value of a business for estate tax purposes is an option for business owners who hope to transfer their business;
Helping business owners address their outdated estate plans is a valuable service by itself, but may also help an advisor identify other assets to manage;
Implementing a new estate plan for a business owner may require additional investments or life insurance;
Working closely with a business owner may enable an advisor to meet other executives at the firm who could be lucrative prospects;
Senior executives at small firms often find their retirement plans to be top-heavy and may be interested in other investment options to offset their limitations;