Small and mid-size business owners should be prime targets for financial advisors as they come out of the pandemic and head into a possible recession, according to the Nationwide Retirement Institute.
Small and mid-size business executive are holding contradictory ideas about the future and need assistance navigating through it, a Nationwide Retirement Institute survey said. This is causing business owners to look for assistance, which presents an opportunity for financial firms that want to grow.
The survey included 400 small business owners, defined as employers with one to 50 employees and less than $10 million in revenue; and 400 mid-size business owners, defined as employers with 51 to 500 employees and $10 million to $500 million in revenue.
Financial advisors have a number of ways to grow their firms by adding small and mid-size business owners as clients, Juan Jose Perez, president of Nationwide Corporate Solutions, said in an interview. The advisors should let business owners know they can create a network of experts for them, and they can save the business owner time.
“They can also provide perspective that the business owner does not have,” Perez said. “For instance, business owners are expecting a coming recession that will be as bad as the 2007-2009 recession. Most advisors would raise their eyebrows at that. The business owner has to have accurate information to prepare their businesses for what is coming; otherwise they are just guessing. Based on their views, many might cut back too far in preparation for a serious recession and not be prepared to serve customers when we come out of the recession.”
Seventy-two percent of the business owners said they are afraid the recession will be similar or even worse than the 2007 to 2009 recession, the survey said. Only 19% of small business owners and 39% of mid-size business owners rate overall business conditions in the U.S. economy positively.
While most business owners are over-estimating the severity of the anticipated recession, they also have a positive picture of their own fortunes, according to the study, with 74% of mid-size and 55% of small business owners rating conditions for their businesses as good or excellent.
Inflation and rising prices will be the most significant challenges over the next six months, followed by rising interest rates, the business owners said.
“It’s understandable that business owners are bracing for a recession, however it’s important to keep in perspective that conditions are different than we experienced in 2008,” Perez added. “Nationwide’s economics team is predicting a shorter, more moderate recession.”
Many of the business owners do not work with an advisor because they do not see what an advisor can do for them or they do not know where to turn for help, which suggests advisors are missing a great opportunity to market themselves and their services to business owners.
Business owners already are reversing some of their pandemic-related actions and are hiring more employees and laying off fewer. More than one in five small businesses owners said they have hired more workers, up 8% from last fall, and only 6% of small businesses have laid off employees.
“Financial advisors play a critical role in helping business owners navigate today’s uncertain economic environment, but today, only 35% of small business owners and 59% of mid-size business owners work with one,” the report said. “Of those who do not, most are hesitant because they feel they can handle their business’s finances on their own, or they said they think that financial advisors are too costly. Some indicated they don’t know where to go to find a good advisor.”
If given the opportunity, business owners would seek guidance on inflation, rising interest rates, market volatility and access to capital, among other issues.
The Secure 2.0 Act opens opportunities for advisors for retirement planning for businesses, but many advisors lack knowledge about the act, the report showed, which highlights an opportunity for advisors to educate their clients.
“SECURE 2.0 opens the door for more business owners to offer retirement benefits for their employees,” Pérez said. “Advisors can help owners understand all the different opportunities to offer benefits at a lower cost, which is a great way to ensure they attract and retain top talent.”
Business owners also need assistance proactively planning for potential crises, monitoring for cybersecurity breaches, performing a risk management audits, and expanding their list of risk management partners, Nationwide said.
“I encourage advisors to position themselves with business owner clients as a risk management partner. Financial services solutions can help them manage financial risks, and the risks associated with attracting or retaining top talent,” Perez said. “An advisor can demonstrate even more value when he or she helps clients bring other risk management partners to the table to create a comprehensive strategy for protecting the business.”
Perez suggested advisors help business-owner clients address their own financial needs as well as the business’s; highlight how using an advisor can free up time for them to work with clients; address employees’ financial needs; act as a risk management partner; access capital; make plans for the post-recession era; and leverage their networks for the clients.