The ClientWise Blog

Business Owners and Investment Risk

Posted by Chris Holman on Sep 2, 2010 6:27:00 PM


The Ewing Marion Kauffman Foundation is the world’s largest foundation devoted to entrepreneurship. Their mission is to help individuals attain economic independence by advancing educational achievement and entrepreneurial success, consistent with the aspirations of the founder, Ewing Marion Kauffman.

(In 1950, Ewing Kauffman founded Marion Laboratories in the basement of his home in Kansas City with a $4,000 investment. His first product was calcium supplements, which he made by pulverizing oyster shells. In 1989, Marion Labs was purchased by Dow Chemical for $2.2 billion. How’s that for entrepreneurship!)

Over the years, the Kauffman Foundation has been a source for fascinating research on business owners and entrepreneurship. Recently, they published an intriguing study on the amount of risk that business owners assume (outside of their direct business interests) entitled, “Business Owners, Financial Risk, and Wealth.”

Among the report’s conclusions:

  1. Business owners are more conservative when it comes to saving and spending.
  2. Business owners allocate more time to shopping for financial products.
  3. Households that own businesses invest more heavily in relatively safe assets.
  4. Retirement saving is significantly more important for business owners than non-business owners. (45% vs. 32 %.)
  5. Business owners are wealthier. The medium net worth for business owners in this study was $497,000…for non-business owners it was $94,000.

If you are a financial advisor, how might you use this study?

  • In the first place, if you work with business owners now, this might corroborate what you have intuitively known all along. As such, the report might bolster you to guide your business owner clients to more conservative portfolios. (Don’t make assumptions though! All clients are different.)
  • You might share this report with your business owner clients in order to stimulate a discussion regarding their financial risk.
  • If you currently do not work with business owners, you might want to use the study to begin a targeted campaign to attract business owners as clients.

Today, September 2nd, is the birthday of Andy Grove, one of the first employees of Intel, who oversaw a 4,500% increase in Intel’s market capitalization while serving as CEO. Grove was born to a middle-class family in Budapest, Hungary. During the Hungarian Revolution of 1956, he left his home and family at the age of 19, under cover of darkness and emigrated to the United States.

Andy Grove once said, “Your career is your business, and you are its CEO.”

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