Get All Access for $5/mo

A $12 Trillion Race Is on for the Financial Services Industry. Here's How to Win It. The financial services industry has a huge opportunity (and challenge) to face in the next ten years.

By Michael Carter

Opinions expressed by Entrepreneur contributors are their own.

selensergen | Getty Images

According to Orion Advisor Services, $12 trillion of business owner wealth is expected to transfer during the next ten years in the United States. This makes it one of the most significant opportunities for the financial services industry in a generation -- but also one of the most challenging.

Business owners have been ignored for the most part by the marketing efforts of financial services firms. For the past 50 years, asset managers, wealth advisors and insurers have spent the majority of their efforts on marketing to the so-called "wealthy affluent" and corporations and their officers. And the unique behavior patterns, retirement goals, balanced planning needs, and risk mitigation strategies that business owners have are truly different than those of the "wealthy affluent."

Related: 8 Financial Tips for Entrepreneurs Launching a Startup

Corporate executives who make the majority of their wealth through current income are fundamentally different than those whose main wealth will one day come from the successful transition or sale of their company. For one, a business owner's current income is usually much more modest. They tend to be highly tax-efficient personally, but typically are under-balanced with their wealth management and planning based upon the concentration of their wealth tied to private shares in one industry (their own).

In terms of insurance, it is not much better. While executives (the wealth affluent or professionals) tend to have adequate insurance protection through their firm or company's "key person insurance" coverage, business owners are not as lucky. According to the 2017 Insurance Barometer Study by Life Happens and LIMRA, 71 percent of entrepreneurs say they need life insurance, yet only 59 percent have coverage. Why? The math is more difficult to calculate as it ties directly to the value of their private shares and their ever-changing businesses.

Related: The 7 Financial Habits of the Most Successful Small Business Owners

The wealth and asset management industries are beginning to appreciate the business owner market due to the sheer size of the assets under management (AUM) opportunity. In the next ten years, over 10 million businesses will be transitioning and will need proper succession and exit planning as part of their wealth management and financial planning process. (Source: CNBC/FPA study.)

The challenge for financial advisors and their business owner clients and prospects is the fact that 78 percent of business owners think they will fund their retirement with the sale of their business. This presents a significant planning opportunity and challenge. The advanced advisor will prospect and engage with business owners for the successful transition of their business and embrace holistic planning that factors in the value of their private shares, not just their liquid assets or those in the market.

Related: This Is the Biggest Mistake Entrepreneurs Make in Their Finances

The next 10 years are a race and a challenge for the financial services industry that has never been seen before. Business owner wealth transfer is a generational opportunity where advisors and firms will be made or lost. Those who win will be able to build their product and services suite with the business owner in mind by leveraging technology and thinking like the entrepreneurs they hope to serve. Financial services firms and their advisors can't take the same "butter knife" they use for the wealthy affluent as they do for entrepreneurs. The winners of the financial planning "knife fight" will be those that understand the value of the client and their actual business through technology and customized products.

Michael Carter

Founder and CEO of BizEquity

Michael M. Carter is the founder and CEO of BizEquity and the inventor of an online valuation service that's helping the small business economy. BizEquity was recently recognized as one of the top 360 companies in the United States by Entrepreneur Media for two years in a row.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick


ChatGPT is Becoming More Human-Like. Here's How The Tool is Getting Smarter at Replicating Your Voice, Brand and Personality.

AI can be instrumental in building your brand and boosting awareness, but the right approach is critical. A custom GPT delivers tailored collateral based on your ethos, personality and unique positioning factors.

Business News

Is the AI Industry Consolidating? Hugging Face CEO Says More AI Entrepreneurs Are Looking to Be Acquired

Clément Delangue, the CEO of Hugging Face, a $4.5 billion startup, says he gets at least 10 acquisition requests a week and it's "increased quite a lot."

Growing a Business

He Immigrated to the U.S. and Got a Job at McDonald's — Then His Aversion to Being 'Too Comfortable' Led to a Fast-Growing Company That's Hard to Miss

Voyo Popovic launched his moving and storage company in 2018 — and he's been innovating in the industry ever since.

Business News

You Can Now Apply to Renew Your U.S. Passport Online — But There's a Catch

The U.S. State Department officially launched the beta program this week.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Business News

Apple Reportedly Isn't Paying OpenAI to Use ChatGPT in iPhones

The next big iPhone update brings ChatGPT directly to Apple devices.