Are business owners a missed opportunity for advisers?

Less than one-third of Australian business owners have an ongoing advice relationship, highlighting an unmet opportunity for the financial advice profession to target.

NAB Private Wealth’s research, conducted by CoreData, discovered that the majority of business owners in Australia do not have an ongoing relationship with a financial adviser.

Just 30 per cent of business owners surveyed said they have an ongoing adviser relationship and 25 per cent said they use one but only when required.

Another 7 per cent said they have seen an adviser in the past but no longer do so, 20 per cent have never used an adviser but may do so in the future, and 18 per cent never had an advice relationship and don’t intend to.

“For those without advisers, many turn to their accountants for information. This is driven not only out of convenience, but also due to having an established trust-based relationship,” NAB Private Wealth said.

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“Many are unsure where to turn to for reliable information, support and guidance regarding their financial needs.”

Amid the lack of long-term advice relationships, business owners are facing challenges around succession planning and the intergenerational wealth transfer as they near retirement age.

NAB Private Wealth revealed nearly half (48 per cent) of small and medium-sized business owners expect their retirement will trigger the closure and liquidation of their business or will force them to sell to someone outside their family.

Michael Saadie, executive at NAB Private Wealth, said that while small-business owners expected their family members to take over the practice in the past, this is no longer a reality at the moment.

“Most business owners no longer anticipate a family successor because fewer next-generation family members are seeking to step into small business ownership roles. Next-generation family members may have career aspirations in new and evolving industries or face growing complexities of managing a business in an increasingly competitive landscape,” Saadie said.

“At such a pivotal time, this shift makes it critical for business owners to have a well-structured succession plan, so they have certainty over what happens to their business when they retire.”

In the financial advice space, succession planning has historically been a weak spot. Adviser Ratings’ 2024 Australian Financial Advice Landscape report previously found 40 per cent of advice firms had not nominated a successor and said they don’t need one, while 30 per cent said they need a successor but haven’t begun the search.

Commentators also told Money Management that advisers “very rarely” plan their exit from the practice in advance, which presents problems later on down the line, particularly if a sudden trigger event were to arise. This includes death, disability, retirement, or resignation.

In terms of the incoming wealth transfer, NAB Private Wealth found just one-third (34 per cent) of business owners have a clearly documented plan for transferring their wealth.

Meanwhile, another 31 per cent have a general plan that has been discussed with others but is not written down. A further 20 per cent have a general plan but have not discussed it with anyone and the remaining 14 per cent are yet to give it any thought.

“In reflection of this, over half have concerns over their level of preparedness for wealth transfer at this stage, highlighting an opportunity and need for advice and support from professionals in developing these plans,” it said.

“There is therefore a need for strategic financial advice to help business owners navigate the complexities of wealth transfer, ensuring that their assets are managed according to their wishes.”