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Small business owners might do a good job creating wealth and jobs.
But when it's time to plan for their own financial future, entrepreneurs aren't so strong, especially in a key retirement planning principle: asset diversification.
That's a key takeaway from the inaugural CNBC/Financial Planning Association Small Business and Financial Planning Survey. The business cable network and trade group found the “vast majority of (small business owners') invested wealth is tied up in their business, a tactic that is shortchanging their personal financial futures.”
The survey polled financial planners and wealth advisers nationwide who work primarily with small business owners. Of course, it shouldn't be a surprise that financial planners are behind a survey that says a group of mostly high net worth people need more financial planning in their lives. But the data do prove the organization's point.
For example, 70% of small business owners consider their business a version of wealth planning, the survey reports. Entrepreneurs who invest significantly outside their business put their money mostly in stocks, real estate and bonds.
Beyond poor diversification, more than half the respondents, 54%, say their small business owner clients don't have enough protection against financial risks like disability or death. Financial planners, finally, lament their lack of face time with small business owner-clients: Not even three in 10, 25%, meet with their adviser on a quarterly basis, while 72% set up annual meetings.
“Small business owners are very myopic and tend to focus on the viability and growth of their business, ignoring much else, including their long-term financial needs,” certified financial planner Michael
Branham says in the survey. Branham is chairman of the FPA and president of Cornerstone Wealth Advisors in Minneapolis, a firm with about $200 million of assets under management that works with small business owners. “There needs to be balance between their personal and professional money goals.”
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