With the vast majority of small business owners lacking an exit strategy for their retirement, financial advisors are in a strong position to help implement a solution. That's the idea behind a new advisor training program officially launched today by Principal Funds [profile]: teaching advisors about employee stock ownership plans (ESOPs)

"Mutual fund advisors are already serving as estate planner and wealth manager for small business owners," Jerry Ripperger, director of ESOP consulting at the Principal, told MFWire in an interview. "The advisor is in the perfect position to have that conversation [about ESOPs]."

Citing industry statistics, Ripperger noted that 79 percent of small business owners' wealth is tied up in their businesses. Yet most advisors are not yet talking about the ESOP option.

"People aren't having the conversation. 87 percent of business owners don't have an exit strategy," Ripperger said. "When's the worst time to sell your business? When you have to sell your business."

Ripperger has been traveling the country, meeting up with the Principal's mutual fund wholesalers to spread the ESOP word amongst advisors. The program includes both training for the advisors and materials that they can pass on to their clients. Principal Funds also launched a companion website, http://www.PrincipalFunds.com/ESOP, and an instructional video on YouTube.

"It's really a positive message," Ripperger said, "and at the same time it's a great practice-builder."

He estimates that he's talked to between 500 and 1,000 advisors so far in 2012. And he expects to "talk to several times that number next year" now that the training program and website have officially launched.

"The advisors have been extremely receptive," Ripperger said. "All of the producing agents show up. They're all coming because it's a different topic."

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Company Press Release

The Principal Helps Financial Professionals Uncover ESOP Opportunities

Employee Stock Ownership Plans can help tap the multi-trillion dollar business-owner market

November 28, 2012 (Des Moines, Iowa) - Baby boomer business owners face a dilemma as they near retirement: nearly 80 percent of their net worth is tied up in their businesses[1]. And the value of that business ownership is about $4.8 trillion dollars[2]. Financial professionals who are able to help owners convert business assets into investable retirement assets can potentially tap into significant opportunities.

The Principal Financial Group® has launched a national training program and a suite of resources to show financial professionals how to do just that with employee stock ownership plans (ESOPs).

ESOPs are qualified defined-contribution retirement plans that are primarily invested in company stock. They transform the illiquid asset of company ownership into cash. That cash can then be invested in other vehicles such as mutual funds, insurance, stocks, bonds and other options.

“ESOPs free up assets so business owners can diversify their investments and fund retirement. They offer owners a strategy for retiring from the business and ESOPs can help employees boost their potential retirement savings,” said Jerry Ripperger, director of ESOP consulting at The Principal. “ESOPs may also generate sizeable assets that can potentially lead to significant sales opportunities for financial professionals.

ESOPs help pave the way for other sales opportunities including estate planning for the owner and executives, insurance and potential access to other retirement benefit plans.

“Financial professionals don’t have to be experts on ESOPs to take advantage of this opportunity. They can work with an experienced ESOP consultant to guide them through the process,” said Ripperger. “As the number one record-keeper of ESOPs[3], The Principal is conducting training around the country and providing resources to help financial professionals make the most of the ESOP opportunity.”

The resources are located at principalfunds.com/ESOP and include a brief training video for financial professionals. Financial professionals can also follow Jerry Ripperger on his blog at blog.principal.com and on Twitter at https://twitter.com/jlripperger.

For more news and insights from The Principal, connect with us on Twitter at: http://twitter.com/ThePrincipal.

About the Principal Financial Group

The Principal Financial Group® (The Principal®)[4] is a global investment management leader including retirement services, insurance solutions and asset management. The Principal offers businesses, individuals and institutional clients a wide range of financial products and services through its diverse family of companies. Founded in 1879 and a member of the FORTUNE 500®, the Principal Financial Group has $392.2 billion in assets under management[5] and serves some 18.3 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com.

[1] 2007 Survey of Consumer Finances - excludes value of primary residence.

[2] 2010 LIMRA study.

[3] Based on the number of recordkeeping plans, PLANSPONSOR Recordkeeping Survey, "Tying it all together, picking the best provider," June 2011.

[4] “The Principal Financial Group” and “The Principal” are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.

[5] As of September 30, 2012.

 

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