There are several pervasive myths that surround owning your own business; one being that investing everything back into the business is a good way to build wealth. 

In fact, as many affluent business owners realize, putting all your earnings back into your business engenders an unbalanced financial portfolio.

For many affluent business owners, a significant portion of their net worth is tied up in their business. This is an important consideration for their financial planning and long-term goals. Per Spectrem Group research, affluent business owners only report a 56% satisfaction rate with their current advisors. Part of this frustration stems from the fact that a business owner’s needs are different from the other affluent investor’s; they prefer a financial advisor who can handle both their personal and business needs simultaneously. Those needs can be more demanding than those of a non-business owning client, and can include expanded insurance needs when business equity-holding partners are involved, as well as the expectation of advisors to provide and manage that company’s employee retirement plan.

Affluent business owners keep 23% of their investable income in cash and cash equivalents (checking, savings, CDs, money market accounts). The average affluent household keeps 9%. These more liquid assets can be easily put back into the business if need be. Affluent business owners also invest 52% less in managed accounts than do their non-business owning counterparts (11%). This all speaks to the need that business owners have for asset fluidity.

Business Owners Seek Contact

Business owners are self-directed, confident, and used to making their own decisions but still crave specialized, regular contact from their advisors. They report that the frequency and quality of contact with their current advisors is extremely low. Because of this, it is not surprising that over a third of these households do not feel they receive adequate communication from their advisors. When business owners are seeking an advisor, or perhaps shopping for one of the seemingly mythical firms that can handle both business and personal asset management, there are several things to look for. A collaboration model is key; that is a grouping of several advisors who deal with personal and business finances, as well as insurance needs, tax planning, estate planning, and succession preparation, just to name a few. It isn’t necessary for one firm to offer these services in house, rather to have collaborative partnerships with the right organizations/people who can provide a solution that is closer to a “one stop-shop”. Business owners know what their customer’s want and are skilled at giving it to them. They deserve the same from their financial advisors.

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