Baby Boomer business owners face a dilemma as they near retirement: nearly 80% of their net worth is tied up in their businesses. The value of that business ownership is about $4.8 trillion dollars, according to a LIMRA study. Financial professionals who are able to help owners convert business assets into investable retirement assets can potentially tap into significant opportunities.
The Principal Financial Group has launched a national training program and a suite of resources to show financial professionals how to do that with ESOPs.
ESOPs are qualified defined contribution retirement plans that are primarily invested in company stock. They transform the illiquid asset of company ownership into cash. That cash can then be invested in other vehicles such as mutual funds, insurance, stocks, bonds and other options.
The stock plans free up assets so business owners can diversify investments and fund retirement, according to Jerry Ripperger, director of ESOP consulting at The Principal. “They offer owners a strategy for retiring from the business, and ESOPs can help employees boost their potential retirement savings,” he said. “ESOPs may also generate sizeable assets that can potentially lead to significant sales opportunities for financial professionals.”
ESOPs help pave the way for other sales opportunities including estate planning for the owner and executives, insurance and potential access to other retirement benefit plans.
“Financial professionals don’t have to be experts on ESOPs to take advantage of this opportunity,” Ripperger pointed out. An experienced consultant can guide them through the process. The Principal is conducting training around the country and providing resources to help financial professionals look into opportunities with the stock plans.
The Principal Financial Groupprovides retirement services, insurance solutions and asset management.