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U.S. Trust Study Finds Five Common Attributes of Business Owners

Most Are Self-made Entrepreneurs Focused on Growth and Impact, but Lack Exit Strategy

Tuesday, June 23, 2015 9:00 am EDT

Dateline:

NEW YORK

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NYSE:
BAC
"For many owners, their business lives and personal lives are closely intertwined. But those two sides often don’t get equal attention"

Many business owners are not taking enough steps to protect their personal and family’s financial assets, according to a study of business owners and entrepreneurs by U.S. Trust. The survey also shows that business owners struggle with competing priorities across their work, personal, and financial lives, which can take a toll on their health.

Sixty-one percent of business owners do not have a formal plan for transferring ownership of their companies when or if they sell the business or transfer ownership to family members, the survey found. The findings, drawn from the responses of 118 business owners with at least $3 million in investable assets, were part of the 2015 U.S. Trust Insights on Wealth and Worth® survey.

“For many owners, their business lives and personal lives are closely intertwined. But those two sides often don’t get equal attention,” said Keith Banks, president of U.S. Trust. “Owners can realize the value of their lifelong work and provide for their families with a well-thought-out plan for the future. What we’re seeing is that they are so wrapped up in the day-to-day task of running their companies that they could ultimately put their financial security and legacies at risk.”

The lack of a succession plan could undercut their other priorities, such as providing financial security for their families. While just 16 percent expect to pass on their companies to their children or other family members, 62 percent consider it important to leave a financial inheritance to their heirs. Still, 81 percent acknowledge they’ve never talked to a professional advisor about succession planning. The top reasons owners say they haven’t drawn up a formal plan include:

  • They aren’t ready to retire.
  • They have postponed making a decision.
  • Their families or colleagues are already aware of their informal plans for the future of the business.
  • Their wishes for the business have been outlined in a will.
  • They are too busy with the daily operation of their business.

Pressure, pride and the importance of health
Most high net worth and ultra high net worth business owners surveyed are self-made. Nearly six in 10 grew up in middle- or lower-income households. Three-quarters (77 percent) of the respondents are entrepreneurs who founded their businesses. Another 15 percent acquired a company or bought out their partners, while 8 percent inherited their firms.

The 2015 U.S. Trust Insights on Wealth and Worth survey found that many business owners and entrepreneurs share at least five similar attributes:

  • A passion for their business: Nine in 10 (92 percent) business owners say they have a clear sense of purpose for their lives, and three-quarters (75 percent) consider meaningful work an important aspect of their purpose.
  • Personal and business lives that are closely intertwined: A high proportion of business owners’ finances are tied up in their companies. Forty-four percent say most of their income and financial assets are linked to their firms. For owners under the age of 50, that is especially true; 64 percent say their business represents most of their income and assets.
  • A focus on health, family and financial security: Seventy-six percent say their health is their most important personal asset. Yet, 35 percent say they’ve sacrificed their health for the sake of their careers.
  • A strong sense of responsibility for the needs of others: Seventy-nine percent say they typically put the needs of others ahead of their own. Partly as a result, 59 percent say their personal, work, financial and social goals often conflict with each other.
  • A desire to give back to society: Nine in 10 (92 percent) business owners say that giving back to society is important, if not essential, to their lives, and place greater relative importance on giving back than non-business owners.

Business is personal
Given the personal liability that comes with many business structures, business owners are concerned with how the business affects their personal reputation and wealth. They worry about work and personal threats such as:

  • Guarding their personal reputation (56 percent).
  • Protecting their businesses from lawsuits (44 percent).
  • Defending their data from hackers or cyber attacks (42 percent).
  • Finding business advisors they can trust (33 percent).
  • Access to credit (24 percent).

“Business owners’ personal identities are closely tied to their companies,” Banks said. “They are passionate about their enterprises. Running a company is a tremendous source of pride for them. As devoted as they are to their businesses, they have to be sure to avoid unnecessary risks that could jeopardize the reputations they are trying to protect.”

Taking care of employees
Because they often see their businesses as extensions of themselves, owners believe it is their responsibility to take care of their employees. Ninety-three percent say they would not cut the number of workers they employ to manage their tax or business risk. And, while 24 percent are concerned about the cost of employee health coverage, 96 percent have continued to provide health benefits since the Affordable Care Act went into effect.

The complete 2015 U.S. Trust Insights on Wealth and Worth survey findings can be found at www.ustrust.com/survey.

Survey Methodology
The 2015 U.S. Trust Insights on Wealth and Worth® survey is based on a nationwide survey of 640 high net worth and ultra high net worth adults, of which, 118 are business owners, 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 January 2015. 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
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 97 offices in 31 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.

Bank of America
Bank of America is one of the world’s largest financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 48 million consumer and small business relationships with approximately 4,800 retail financial centers and approximately 15,900 ATMs and award-winning online banking with 31 million active users and approximately 17 million mobile users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.

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U.S. Trust operates through Bank of America, N.A., and other subsidiaries of Bank of America Corporation.

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Contact:

Reporters May Contact:
Julia Ehrenfeld, U.S. Trust, 1.646.855.3267
julia.ehrenfeld@bankofamerica.com