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Young Wealthy Entrepreneurs Seek Business Ownership With Purpose
Business ownership at all ages is thriving as a new generation of young entrepreneurs inherits family wealth, including many of the businesses created by baby boomers, according to findings released today from U.S. Trust’s 2013 Insights on Wealth and Worth. The study of 200 U.S. high net worth business owners found generational differences in the motivation for owning a business but widespread agreement on the biggest challenge to future growth.
Key findings include:
“Business ownership is alive and well in the U.S. economy, and new innovation is fueling entrepreneurship that knows no age limits,” said Keith Banks, president of U.S. Trust. “Many of these owners have substantial personal assets invested in their business, therefore business costs and tax pressures are never far from their mind as they can carry significant and immediate implications to the owner, their business and the entire family's financial security.”
Challenges to business growth
In response to the cumulative impact of increased federal, state and local taxes, business owners have taken a variety of actions including: reducing or limiting staff (26 percent); moving the business to a state with lower personal income tax rates (18 percent) or state with lower costs (15); and eliminating or reducing the provision of healthcare benefits (18 percent).
One in 10 business owners (11 percent) have sold or intend to sell the business, including 16 percent of those who have an annual household income greater than $1 million.
Few established business owners cited access to capital or credit as a top challenge to growing their business. Among business owners surveyed, 84 percent said that getting a bank loan and 88 percent said access to investment capital has not held them back from growing their business. Nearly two in five owners (19 percent) have increased their investment in the business or increased borrowing as a result of increased taxes.
Balancing act: Managing personal and business finances and responsibilities
Insights on Wealth and Worth found that people who own their own business have significantly higher annual household incomes than other high net worth households. Seventy-seven percent of non-retired business owners surveyed have an annual income greater than $200K and 26 percent earn $1 million or more, the majority of whom are young entrepreneurs under the age of 49. By comparison, 59 percent of non-retired, non-business owners have an annual income greater than $200K, and only 9 percent earn more than $1 million a year.
Business owners, especially baby boomers, are typically the wealthiest in their family of origin. As a result, they tend to take on responsibility for the well-being of extended family members, more so than non-business owners. U.S. Trust found that most business owners do not have a financial plan that accounts for this.
More than half (53 percent) of business owners provide, or have provided, substantial financial support (not a loan) to other adult members of their family, including their parents, grandparents, siblings, nieces and nephews.
“We’re seeing the next generation of entrepreneurs take a longer, multi-generational and purposeful approach to creating wealth, and business owners are generally more proactive about protecting their assets,” added Banks. “At the same time, despite all the advantages of owning a business, and maybe because of it, business owners face distinct challenges and may be most vulnerable to risks because so much of their income, assets and focus are tied to the business.”
When it comes to managing the needs of the business and personal finances and goals, many business owners pay greater attention to the business and put off important actions that can affect their overall wealth and financial security. This includes business succession planning, financial planning, estate planning, investment decision-making and wealth structuring.
Additional survey findings from the 2013 U.S. Trust Insights on Wealth and Worth can be found at www.ustrust.com/survey.
U.S. Trust 2013 Insights on Wealth and Worth is based on a nationwide survey of 711 high net worth and ultra high net worth adults with at least $3 million in investable assets, not including the value of their primary residence. Respondents were equally divided among those who have between $3 million and $5 million, $5 million and $10 million, and $10 million or more in investable assets. The survey was conducted online by the independent research firm Phoenix Marketing International in February and March of 2013. Asset information was self-reported by the respondent. Verification for respondent qualification occurred at the panel company, using algorithms in place to ensure consistency of information provided, and was confirmed with questions from the survey itself. All data have been tested for statistical significance at the 95 percent confidence level.
U.S. Trust, Bank of America Private Wealth Management is a leading private wealth management organization providing vast resources and customized solutions to help meet clients' wealth structuring, investment management, banking and credit needs. Clients are served by teams of experienced advisors offering a range of financial services, including investment management, financial and succession planning, philanthropic and specialty asset management, family office services, custom credit solutions, financial administration and family trust stewardship.
U.S. Trust is part of the Global Wealth and Investment Management unit of Bank of America, N.A., which is a global leader in wealth management, private banking and retail brokerage. U.S. Trust employs more than 4,000 professionals and maintains 140 offices in 32 states.
As part of Bank of America, U.S. Trust can provide access to a broad range of banking solutions for individuals and businesses, and an extensive retail banking platform.
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