Learn how small and mid-size business owners acquire their wealth in this free report.
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Transcript of Learn how small and mid-size business owners acquire their wealth in this free report.
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Representative of Middle Market nationwide
Nationally Representative
Study
2016 Insights Method2016 RESEARCH METHOD
2
1,740 INTERVIEWS
BUSINESSES WITH 1-999
EMPLOYEES
OWNERS, C-SUITE, KEY
DECISION MAKERS
PHONE INTERNET INTERVIEWS
FIELDED THROUGH JANUARY ‘16
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EXECUTIVE SUMMARY
1. Even though there has been recent stock market volatility, economic indicators continue to be solid, and SMB owners’ investment portfolios are holding steady.
2. SMB owners with 5-499 employees account for $1.6 trillion in personal investment dollars, a level comparable to the GDP’s of Canada ($1.57T) and Brazil ($1.8T).
3. The wealthiest SMBs, with $1 million or more in personal investments, account for 19% of business owners, and control more than half (52%) of all SMB investment dollars.
4. Persona: Self-made, wealthy, highly educated men in their late 50’s. All run successful businesses that generate the bulk of sales locally.
5. The wealthier SMB owners are ….… the greater their optimism about their financial futures.
… the less inclined they are to retire (‘ever’).
… the more reliant they are on seeking professional financial help.
… the more satisfied they are with their financial planner.
6. Leading financial advisors include independent financial planners, full service brokerage companies, and wealth management firms.
7. Wealthy SMBs are invested in traditional, conservative vehicles, such as real estate, savings accounts, stocks, mutual funds, life insurance, 401(k)s.
8. Awareness, trial and usage across investment brands varies dramatically, and is influenced by SMB owners’ degree of wealth.
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Economic Indicators &
SMB Affluence
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Sources: U.S. GDP -- Bureau of Economic Analysis, National Economic accounts: chart on %change from proceeding years based on chained 2009
dollars (www.BEA.gov/national/index.htm; U.S. Budget Deficit -- www.usgovernmentspending.com
$236$127
-$158
-$374 -$413-$318
-$248-$161
-$458
-$1,413
-$1,294 -$1,300
-$1,087
-$608
-$466 -$439
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
U.S. BUDGET DEFICIT(IN BILLIONS)
4.1%
1.0%
1.8%
2.8%
3.8%3.4%
2.7%
1.8%
-0.3%
-2.8%
2.5%1.8%
2.8%
2.2%
2.4%
2.4%
U.S. GDP ANNUAL CHANGE
THE GDP UP 2%; THE BUDGET DEFICIT
IS AT A SEVEN YEAR LOW
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Source: U.S. Dept of Labor/Labor Force Statistics
4.0%4.7%
5.8% 6.0% 5.5% 5.1% 4.6% 4.6%5.8%
9.3% 9.6% 8.9%8.1%
7.4%6.2%
5.3% 4.9%
U.S. UNEMPLOYMENT RATE
THE UNEMPLOYMENT RATE IS BACK AT
PRE-RECESSION LEVELS
6
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THE STOCK MARKET HAS RECENTLY BEEN VOLATILE
7Sources: Google Finance, Closing of the DJIA at the end of December for each year indicated
DOW JONES INDUSTRIAL AVERAGE:
ANNUAL YEAR END & RECENT CLOSINGS
10787
10022
8342
1045410783 10717
12463
13265
8776
10428
11577
12217
13104
16577
18053
17425
15882
16620
5000
7000
9000
11000
13000
15000
17000
19000
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MARKET VALUE OF PERSONAL
INVESTMENT PORTFOLIO (AVERAGE IN THOUSANDS)
NONETHELESS, SMB OWNERS’
PERSONAL INVESTMENT VALUATIONS
REMAIN RELATIVELY UNCHANGED
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“Which of the following best describes the total market value of your investment portfolio (excluding real estate, retirement accounts &
529/College savings plans)?” “Which of the following best describes your total net worth?”
$265.4$217.7 $237.4
$350.8 $334.6
$413.2$448.2 $460.3
2008 2009 2010 2011 2012 2013 2014 2015
$1.41
$1.27 $1.22 $1.27 $1.20
$1.40$1.53 $1.52
2008 2009 2010 2011 2012 2013 2014 2015
TOTAL NET WORTH (AVERAGE IN MILLIONS)
Actual
Year
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23% 23% 24% 22% 22% 20% 16%
52% 50% 46% 49%41%
38% 41%
25% 27%21% 21%
26%28% 27%
9% 8% 11% 14% 16%
2009 2010 2011 2012 2013 2014 2015
$1M or More
$250K-$999K
Under $250K
No Answer
SMBs HAVE SUBSTANTIAL WEALTH;
43% HAVE INVESTMENTS VALUED AT
$250K+
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DISTRIBUTION OF SMB PERSONAL
INVESTMENT PORTFOLIO VALUATIONS
NOTE: $1M+ portfolio size not broken out for 2009 and 2010
“Which of the following best describes the total market value of your investment portfolio (excluding real estate, retirement accounts & 529/college
savings plans)?”
Market Value of
Portfolio:
Actual Year
43%
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TOTAL INVESTMENT VALUATIONS
Total SMB
Owners
Less than $250K
Portfolio
Affluent
($250K-$999K
Portfolios)
Super Affluents
($1M or More
Portfolios)
# of Businesses 3.44 Million 1.72 Million 1.07 Million 652,828
% of 5-499 Businesses* 100% 50% 31% 19%
Investment Portfolio Size $460.3K $94.3K $545.3K $1.25MM
TOTAL INVESTMENTS** $1.6 Trillion $162 Billion $581 Billion $816 Billion
SMBs REPRESENT $1.6 TRILLION
OVERALL IN PERSONAL INVESTMENTS
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“Which of the following best describes the total value of your investment portfolio (excluding real estate, retirement account investments & 529
plans/college savings plans?”
*Re-percentaged to eliminate ‘no answers;’ **Number of businesses X average investment portfolio size
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INVESTING POWER OF AFFLUENT SMB OWNERS
50%
31%
19%
10%
38%
52%
Less than $250K $250K-$999K $1M or More
% of SMB Owners* % of Total Investments
THE SUPER AFFLUENT ($1M+) CONTROL
OVER HALF OF ALL SMB PERSONAL
INVESTMENTS
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“Which of the following best describes the total value of your investment portfolio (excluding real estate, retirement account investments & 529
plans/college savings plans)?”
*Re-percentaged to eliminate ‘no answers’
SIZE OF PERSONAL
INVESTMENT
PORTFOLIO
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THE WEALTHIEST SMBs PLAN TO
INVEST TWICE THE AMOUNT OF OTHER
AFFLUENTS
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$20.1
$47.1
$100.5
Under $250K $250K-$999K $1M+
“Approximately how much do you personally plan to invest in the next 12 months?”
AMOUNT PLAN TO INVEST IN THE UPCOMING YEAR(IN THOUSANDS)
SIZE OF PERSONAL
INVESTMENT
PORTFOLIO
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Profiles of Affluent and
Super Affluent Investors
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AFFLUENT SMB OWNERS ARE WELL-
EDUCATED, WEALTHY MEN IN THEIR
LATE 50’S
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AFFLUENT SMBs RUN SUCCESSFUL
COMPANIES WITH HIGH SALES
GROWTH; LOCAL SALES PRE-DOMINATE
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THE GREATER SMBs’ WEALTH, THE
MORE OPTIMISTIC THEY ARE ABOUT
THEIR FINANCIAL FUTURES
16“How much do you agree/disagree with the following statements about your personal finances and investments?”
ATTITUDES ABOUT INVESTING
94%
93%
81%
81%
66%
74%
I feel confident that I will be able to maintainmy current lifestyle throughout my retirement
I am optimistic about my financial future
Under $250K $250-$999 $1M+SIZE OF PERSONAL
INVESTMENT PORTFOLIO
% Agree
Completely/Mostly
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FOR SMBs, HAVING A LARGE NEST EGG
DOES NOT NECESSARILY TRANSLATE TO
TAKING EARLY RETIREMENT
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33%30%
28%
14% 13%
7%
42%
47%45%
11% 10%
20%
Under $250K $250K-$999K $1M+
Before 65 At 65 66 or Older Never
PLANNED RETIREMENT AGE
SIZE OF PERSONAL
INVESTMENT
PORTFOLIO
65% Will retire
after age 65 or
never
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MOST ACQUIRED THEIR WEALTH VIA
THEIR OWN HARD WORK
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73%
65% 63%
19%
28% 30%
8% 7% 7%
Under $250K $250K-$999K $1M+
Money Earned By Working Via Investments Inheritance
SHARE OF HOW WEALTH WAS ACCUMULATED
SIZE OF PERSONAL
INVESTMENT
PORTFOLIO
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Wealth Management &
Investment Choices
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WEALTHY SMBs HAVE POSITIVE
IMPRESSIONS OF THE BANKING &
FINANCIAL SERVICES INDUSTRIES
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AFFLUENTS $250K+ PORTFOLIO
INDUSTRY OUTLOOK% VERY/SOMEWHAT POSITIVE
“We would like to get your overall impressions of several major industries in the U.S. For each, please give your overall view of it.”
Actual
Year
41%
19%
29%32% 31%
35%
49% 49%
37%
21% 22%
28%25%
35%
40%
46%
2007 2008 2009 2010 2011 2012 2013 2015
Financial/Investment Services Banking
38%42%
53%55%
29%33%
41%
49%
2011 2012 2013 2015
Financial/Investment Services Banking
SUPER AFFLUENTS $1M+ PORTFOLIO
INDUSTRY OUTLOOK% VERY/SOMEWHAT POSITIVE
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WEALTHIER SMBS ($1M+) ARE MORE
INCLINED TO USE FINANCIAL
PLANNERS
21“How much do you agree/disagree with the following statements about your personal finances and investments?”
ATTITUDES ABOUT INVESTING
67%
43%
59%
53%
56%
62%
I use a financial planner to help memanage my wealth
I don’t feel I know enough about investing to manage my own portfolio
Under $250K $250-$999 $1M+SIZE OF PERSONAL
INVESTMENT PORTFOLIO
% Agree
Completely/Mostly
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WEALTHY SMB INVESTORS RELY ON FINANCIAL PLANNERS TO PLACE THE MAJORITY OF THEIR TRADES
22
Financial Planner or Investment Company
53%Personally via online trading
28%
Other Means19%
Financial Planner or Investment Company
58%
Personally via online trading
23%
Other Means19%
AFFLUENT $250K-$999K PORTFOLIO SUPER AFFLUENT $1M+ PORTFOLIO
“What percentage of your personal investment portfolio consists of investments purchased for you by a financial planner of investment company? Purchased by you
via online trading? By other means?”
SHARE DISTRIBUTION OF HOW TRADES ARE MADE
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POOR CUSTOMER SERVICE &
INVESTMENT PERFORMANCE ARE KEY
DRIVERS TO SWITCHING ADVISORS
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TOP REASON TO CHANGE FINANCIAL PLANNERS/HIRE A NEW
COMPANY FOR FINANCIAL ADVICE
“To what extent might each of the following factors drive you to consider changing financial planners or to focus in more
closely on your personal financial planning?”
% Rating Critical
Factor/Contributes A Lot
11%
26%
34%
26%
28%
37%
29%
56%
69%
16%
28%
29%
29%
33%
39%
43%
54%
60%
Significant birthday or milestone
Receive advice from credible source (invest pub, analyst)
Current financial planner changes firms
Recommendation from a trusted friend or colleague
Volatility of the stock market
Higher federal, state and local taxes
Receipt of a monetary windfall (bonus, inheritance)
Poor portfolio performance
Inadequate customer service
$250K-$999K
$1M+
SIZE OF PERSONAL
INVESTMENT PORTFOLIO
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AFFLUENT SMB OWNERS
($250K-$999K)
Financial Providers &
Types of Investments
-
INDEPENDENT ADVISORS &
BROKERAGE FIRMS LEAD AS PRIMARY
INVESTMENT ADVISORS
25
PRIMARY INVESTMENT ADVISOR(AMONG AFFLUENTS WITH $250K-$999K PORTFOLIOS)
“Which of the following financial providers for investments do you currently use?” “Which of these providers is your primary advisor for you personal
finances?”
32%
28% 27%
23% 23%
19% 18%16%
13%14%
10%
20%17%
11%9% 8% 7% 8%
Currently Use Primary Provider
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AFFLUENT SMB OWNERS ARE LESS
SATISFIED WITH THEIR ADVISORS THAN
THE WEALTHIEST SMBs
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7% 6%
60%
39%
33%
55%
$250K-$999K $1M+
Extremely Satisfied
Somewhat Satisfied
Not Very/Not At All
SATISFACTION WITH PRIMARY INVESTMENT ADVISOR(AMONG AFFLUENTS WITH $250K+ PORTFOLIOS)
“How satisfied are you with your primary financial advisor?”
SIZE OF PERSONAL
INVESTMENT PORTFOLIO
-
AFFLUENTS’ LEAD INVESTMENTS ARE
REAL ESTATE & SAVINGS ACCOUNTS
27
INVESTMENTS OWNED / PLAN TO INVEST IN(AMONG AFFLUENTS WITH $250K-$999K PORTFOLIOS)
“Please click all of the following types of investments that you currently own.” “In the next year, what types of investments are you planning to invest in?”
67%65%
62%58%
52%50%
44% 44%
21% 20% 20% 18% 17% 15% 15% 13% 11% 8% 7%4%
21%
29%
39%
32%
11%
23%17% 18%
8%10%
6%9%
6%4%
10%6% 8%
4% 3% 2%
Currently Own Plan to Invest in Next Year
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Financial Providers &
Types of InvestmentsSUPER AFFLUENTS
SMB OWNERS ($1M+)
-
EMPLOYEE PLANS, WEALTH
MANAGEMENT & BROKERAGE FIRMS
LEAD AS PRIMARY ADVISORS
29
“Which of the following financial providers for investments do you currently use?” “Which of these providers is your primary advisor for you personal
finances?”
PRIMARY INVESTMENT ADVISOR(AMONG SUPER AFFLUENTS WITH $1M+ PORTFOLIOS)
39%
34%30% 29%
27%25%
22%20%
18%
10%
23%
17%
5%
18%
8%6%
10%7%
Currently Use Primary Provider
-
THE WEALTHIEST SMB OWNERS ARE
HIGHLY SATISFIED WITH THEIR
PRIMARY ADVISORS
30
7% 6%
60%
39%
33%
55%
$250K-$999K $1M+
Extremely Satisfied
Somewhat Satisfied
Not Very/Not At All
SATISFACTION WITH PRIMARY INVESTMENT ADVISOR(AMONG AFFLUENTS WITH $250K+ PORTFOLIOS)
“How satisfied are you with your primary financial advisor?”
SIZE OF PERSONAL
INVESTMENT PORTFOLIO
-
STOCKS & REAL ESTATE ARE LEAD
INVESTMENTS
31
“Please click all of the following types of investments that you currently own.” “In the next year, what types of investments are you planning to invest in?”
INVESTMENTS OWNED / PLAN TO INVEST IN(AMONG SUPER AFFLUENT WITH $1M+ PORTFOLIOS)
73% 71%68%
64%
58%54% 53%
37% 36%31% 30%
26% 25% 25%21% 20% 20%
14%11% 11%
49%
22%27%
41%
11%
25%22%
13%15%
11%10% 8% 7%
13% 11%9%
5% 7% 5%3%
Currently Own Plan to Invest in Next Year
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Investment Brand
Awareness and Usage
-
103
113
107
121
106
98
105 106
112
107
116 115
110 111
124
104 107
111
101
113
108 108 106
139141 142
120
125
135133
116
120
128
110112
125
106
112 113 109113
123
116
103
114 113
14% 15%20% 20% 22%
22% 23%
25% 25% 27%32%
37% 38% 39% 41%42% 45%
50% 50%53% 55% 56%
57%
-70%
-50%
-30%
-10%
10%
30%
50%
70%
80
100
120
140
160
$250K-$999K (Index v. Total SMBs) $1M+ (Index v. Total SMBS) Familiarity Total SMBs
WEALTHIER SMB OWNERS HAVE
HEIGHTENED AWARENESS OF FINANCIAL
INVESTMENT BRANDS
33
FAMILIARY OF FINANCIAL/INVESTMENT BRANDS(AFFLUENTS & SUPER AFFLUENTS INDEXED VERSUS TOTAL SMB OWNERS)
-
132 125 128
110 118
106
124
112 105
127
112 119
134
124 123
111
123
150
121 126 124
129
110
121
127 133138
103
127
149
123
158
146 143
162
134 145 139
158
119126 124
137
155
166
123
8%9% 9%
22%20%
17%
29%
9%11%
8%
23%
15%12%
9%13%
10%12% 12%
19% 19%
7%10%
18%
0%
10%
20%
30%
40%
50%
60%
0
20
40
60
80
100
120
140
160
180
200
$250K-$999K (Index v. Total SMBs) $1M+ (Index v. Total SMBS) Ever Used Among Total SMBs
MOST INVESTMENT COMPANIES HAVE
EXPERIENCED HIGHER TRIAL AMONG
WEALTHIER SMB OWNERS
34
EVER USAGE OF FINANCIAL/INVESTMENT BRANDS(AFFLUENTS & SUPER AFFLUENTS INDEXED VERSUS TOTAL SMB OWNERS)
-
158
135
149
110 117
112
131
103
91
132
107 112
126 130
164
117
127
153
114
133 126
158
115
7671
129138
111 110
146
71
104
85
147
196
103
154
101
152
80
102
116 113
168
193
97
1%4% 3%
11%9%
9%
17%
3% 3%2%
10%6%
5%2%
5%3%
5% 4%
10% 11%
2%4%
9%
0%
10%
20%
30%
40%
50%
60%
0
20
40
60
80
100
120
140
160
180
200
$250K-$999K (Index v. Total SMBs) $1M+ (Index v. Total SMBS) Past Year Usage Total SMBs
WEALTHY SMB OWNERS ARE USING A
HOST OF DIFFERENT INVESTMENT
FIRMS
35
PAST YEAR USAGE OF FINANCIAL/INVESTMENT BRANDS(AFFLUENTS & SUPER AFFLUENTS INDEXED VERSUS TOTAL SMB OWNERS)
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ABOUT THE BUSINESS JOURNALS
36
For more than three decades, American City Business Journals has been the nation’s largest
publisher of local business news and information in print and online, deploying more than 600
journalists across 43 major U.S. cities. ACBJ serves audiences valuable news and data
anytime and anywhere they seek it.
Research:
Jessie Shaw
212-500-0611
Local Advertising:
Alex Orfinger, EVP
703-258-0888
Mike Olivieri, EVP
704-973-1005
National Advertising:
Ryan Whittington, SVP
704-973-1839
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