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Tapping into Small Business Owners

The value of planning and advice for retirement

Posted by Sean Cunniff, Investment Management research leader, on June 18, 2013

The Deloitte Center for Financial Services recently surveyed small business owners with fewer than 25 employees about their retirement security and came up with some very interesting findings[1]. First, 87 percent of those surveyed feel very secure or somewhat secure about their retirement. This compares favorably to the 72 percent of the general population surveyed last year by Deloitte who feel very or somewhat secure. More interestingly, two-thirds of small business owners never plan to retire or only plan to retire when forced to do so for health reasons! Some of these business owners must truly love going to work every day.

Another very interesting finding is that the small business owners who feel the most secure are the ones who have both a financial plan and an advisor. 97 percent of the respondents who fall into this category feel secure or very secure and more than half fall into the very secure category. Only 18 percent of respondents who feel do not have either a plan or an advisor feel very secure. Before financial advisors jump for joy, it needs to be noted that while they clearly have a major impact it might be the financial plan that adds the most to retirement security. Those with a plan but without an advisor actually feel more secure (96 percent) than those with an advisor but without a plan (79 percent).

Another important and surprising finding is that is that nearly 50 percent of small business owners do not consult with a financial advisor. This may present a nice opportunity for advisors to target this space and show their value via financial planning.

Finally, the most surprising finding of the survey: 55 percent of those surveyed expect less than 25 percent of their retirement income to be financed by the sales of their business. Personal savings and investments was clearly the preferred method for owners to finance their retirement, being chosen by more than 80 percent of respondents as the top two sources of income. I expected many more owners to be focused on selling their business, however there was a clear preference to remain working but with shorter hours through consulting or part-time work. The survey did not asses who is actually more prepared for retirement. Rather, it asked who felt more secure about retirement. This may account for the importance of the financial plan. By going through the planning process, setting goals, and understanding their current financial situation, small business owners may not have the “fear of the unknown” and feel more confident knowing what they are facing. 

[1] Small Business Consumer Survey, Deloitte Center for Financial Services

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