Retirement Planning for Business Owner Clients

Many small business owners have only planned for the future insofar as deciding that they will ultimately sell their firms and use the proceeds to finance their retirement; they need expert help from advisers, and so do their employees.

Looking across research on retirement planning, it is easy to notice a theme that emerges time and again—many individuals underestimate the amount of savings they’ll need to retire comfortably.

As a result, financial advisers have an opportunity to enhance the lives of their clients, and in many instances, the lives of their clients’ employees, by incorporating retirement planning services and plan sponsor guidance into their business models. By offering a holistic approach to financial planning, advisers will be positioned to help business owners more effectively plan for their own financial futures and empower employees to do the same.

One of the key components of being an effective adviser in the retirement planning space is understanding and addressing misconceptions often held by business owners. For example, many small business owners have only planned for the future insofar as deciding that they will ultimately sell their firms and use the proceeds to finance their retirement. However, the amount of income gained from selling a business is far from guaranteed, which creates an opportunity for advisers to help clients diversify their retirement strategies for long-term security. By having a frank conversation about a client’s retirement plan and demonstrating the value of a market-based and risk-conscious approach, advisers can help their clients avoid the potential repercussions of putting all their eggs in one proverbial basket.

Small Business Employees Need Help, Too

Small business owners may also hold misconceptions when it comes to employee retirement benefits. While some may believe they don’t have the resources to offer a retirement plan for their business, advancements in technology and the support of third parties can simplify the process of implementing a comprehensive retirement plan. The 401(k) space is rife with intuitive, web-based technology that can streamline and automate plan management, especially when it comes to straightforward profit sharing or deferred compensation plans. At the same time, this automation can reduce the risk of data entry errors and other inefficiencies that can stem from manual plan administration.

The process of implementing an employee retirement plan doesn’t have to be prohibitively costly for small business owners. Employees will be contributing to their own retirement funds, and even plans that do not offer employer matching financially benefit staff through pre-tax savings.

Firms that do have the capability to offer matching programs can also reap the benefits of these very same pre-tax incentives. Moreover, employers should consider providing a company-wide retirement plan as a strategic investment in the firm’s productivity and bottom line, given that offering competitive employee benefits can be a crucial differentiator when it comes to attracting and retaining top talent. 

Advisers Drive Implementation

After helping small business owners understand why retirement planning is necessary for both themselves and their employees comes actual implementation. More novice financial advisers may feel hesitant about branching out into this area for the first time, but there are many third-party resources available to streamline plan design, due diligence measures, recordkeeping and more. With this support, many advisers will come to find that their expertise can be applied fairly consistently across a wide range of industries, and that they’re well-equipped to advise many types of small businesses on retirement planning.

Building out a retirement planning service has clear benefits for small plan sponsors, their employees, and advisers alike. With the right partners and support, financial advisers can become a trusted guide for every aspect of their clients’ lives and help communities better prepare for financial success at each stage of life’s journey.

*Note from the editor

Cathy Clauson is senior vice president of retirement solutions at AssetMark, Inc. AssetMark Retirement Services is a division of AssetMark, Inc., an SEC-registered investment adviser.

This feature is intended to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of Asset International, Strategic Insight or its affiliates.