What advisers can do to help older clients start a new business

What advisers can do to help older clients start a new business
From crafting a budget to serving as a sounding board, financial advisers can play an important role.
FEB 23, 2019

Middle-aged clients who lose a job often turn to some form of entrepreneurship as the next phase of their career. Data suggests that entrepreneurship among individuals over age 50 is growing. Three in 10 entrepreneurs are over 50, which is an increase of 50% since 2007, according to a report published last year by the payroll firm Paychex. Researchers from the Massachusetts Institute of Technology and Northwestern University found in a 2018 paper based on U.S. Census Bureau data that the highest success rates in entrepreneurship are seen among business founders who are middle-aged and older, rather than younger business owners. Advisers can play an important role in helping clients set up a new business venture. "A financial adviser can really be the sounding board," said Kerry Hannon, a work and jobs expert for AARP. "They can help a wannabe entrepreneur get their feet wet and lay the groundwork, in essence, before they make a big financial commitment." Money is the biggest stumbling block to launching a successful business, so helping a client get financially fit enough to start a business and manage debts is perhaps the most important counsel advisers can provide, Ms. Hannon said. This includes helping them with budgeting, paying down or refinancing debt, and identifying ways to downsize, for example, as well as setting up a financial plan for the business.

Locating capital

Another challenge for those starting a business is locating sources of potential capital, whether the funding comes from the client's personal savings, grants or loans. Most entrepreneurs self-finance their startups, said Ms. Hannon, whose book about mid-life entrepreneurship, "Never Too Old To Get Rich," is coming out in May. Robert Falcon, a financial adviser who has helped set up several businesses — for himself and for clients — said advisers can direct clients to services such as LegalZoom that help a new business set up its proper legal entity (such as an S corporation or limited liability company, etc.) and then ships the documentation, all for a few hundred dollars. Advisers also can determine whether the business owner will be subject to any sort of licensing requirements in the state, said Mr. Falcon, founder of Falcon Wealth Managers. Ms. Hannon suggested that advisers can help clients put together a team of the professionals they will need, such as a lawyer and accountant. Advisers also can assist their clients in putting together an informal network or advisory board of other entrepreneurs in the community to connect with on a monthly basis to offer support and inspiration, discuss challenges, and set goals to hold each other accountable, she said.

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