How Small Business Owners Benefit from Financial Advisers’ Help

Behind any good small business retirement plan health is good small plan sponsor health, according to a recent study by Equitable and the SCORE Association, “The Advantage of Advice: How Small Business Owners Navigate Growth, Retirement and Workplace Strategies.”

The report stated that small business owners who work with a financial professional expect to retire seven years earlier—at age 63, rather than 70—than those who do not. They are also twice as likely to offer their employees comprehensive benefits, including a retirement plan and health savings accounts.

“Small businesses don’t have to go at it alone,” says Ed Coleman, a regional vice president at SCORE, a nonprofit group originally named the Service Corps of Retired Executives that partners with the U.S. Small Business Administration to mentor small business owners. “In fact, they shouldn’t go at it alone.”

Retirement Outlook

Nearly six in 10 (59%) of small business owners said they found it difficult to completely retire, even though 42% said they started their business to fund their retirement. In addition, 33% of owners said they did not have a plan to earn income if they became sick, injured or could no longer run their business.

“When the business is the plan, many business owners have no backup for retirement,” the report cautioned.

Eighty-three percent of surveyed small business owners said it is important to consult with a financial professional to get their guidance on business and decisions. Meanwhile, only 63% reported actively seeking financial advice—demonstrating a clear opportunity for plan advisers to step in to close the gap.

Generational Divide

Millennial small business owners were twice as likely as their Generation X and Baby Boomer counterparts to seek out advisers. They also ranked financial professionals the highest, at 58%, as a “trusted source for business guidance,” compared with only 40% of Gen X owners and 29% of Boomers who did so.

Gen X and Boomer owners, who have been “building their business all along,” may feel they can step away from working with their strategic adviser, explains Tracy Shaw, head of marketing engagement strategy for Equitable. “In reality, it’s the perfect time to embrace the next iteration of advice they need.”

Retirement timeline expectations also varied by age. Millennial business owners anticipated retiring at 61, five years earlier than Gen X owners, who expected to retire at 66. Yet Boomers reported still working at 74, revealing notably higher optimism about retirement in younger generations.

Business Health

Small business owners who place high value on working with financial professionals are also driving growth within their businesses. Those who reported valuing financial advisers were three times more likely to add employees and accelerate their retirement timeline, as well as five times more likely to speed up their employee retention plans, than those who do not.

When looking at health benefits, smaller businesses are less likely than larger businesses to offer their employees basic medical insurance, as well as vision, dental, group life or short-term/long term disability benefits, the report stated. Many cited cost and business size as their reasons for not offering the benefits.

However, of small business owners who reported placing high importance on guidance from financial professionals, 54% offered comprehensive health benefits to their employees, compared with only 24% of those who said guidance was “not important.”

“Guidance is a game changer,” Coleman says.

Similarly, 45% of owners who reported valuing professional advice provided retirement benefits, compared with 23% of those who did not value professional advice.

“The guidance is there, waiting to help [them],” Shaw says. “Those who are the most successful business owners have the bandwidth to work on their business, not just in their business.”

Equitable and SCORE surveyed 728 small business owners in June and July.