New data reveals ongoing financial anxieties between SMB employers and workers, largely attributed to market uncertainty and inflation concerns.
Just-released research from Nationwide Retirement Institute, which surveyed 400 U.S. small business owners and 400 midsize business owners, found two-thirds of owners expect a recession within the next six months, with 72% of that number believing it will be similar or worse than the Great Recession in 2008.
Overall morale in the U.S. economy is low, Nationwide saw, with just 19% of small business owners and 39% of midsize owners rating the country’s economy positively. Additionally, close to two-thirds (64%) of small business owners and half of midsize business owners pointed to inflation and rising prices as the most significant challenge facing their business within the next six months. Currently, rising interest rates are at 30% for mid-market-size business owners and 31% for small business owners, up 11 percentage points and down one point from last year.
“It’s understandable that business owners are bracing for a recession, however it’s important to keep in perspective that conditions are different than we experienced in 2008,” said Juan José Pérez, president of Nationwide Corporate Solutions, in the research. “Nationwide’s economics team is predicting a shorter, more moderate recession. While it’s wise to proceed with caution, financial professionals can help business owner clients understand that those who tighten the belt too much in the months ahead could hurt their ability to take advantage of opportunities that present themselves when the economic recovery begins.”
Retirement readiness challenges in volatile markets
The findings come as more employees voice their insecurities about retirement planning in relation to the current market. Another study by Betterment that surveyed 1,000 U.S. workers found three-quarters (75%) of employees said market volatility has impacted their retirement account balances this year. Forty-eight percent of those respondents revealed the volatility has had a moderate to significant impact on their retirement planning, and 45% said it had little to no impact.
Due to the volatility, more current and prospective employees are placing an emphasis on retirement benefits when job hunting, Betterment research found. When asked what benefits would entice them to leave their job, 57% of respondents answered a 401(k) matching program, 51% said a 401(k) or other retirement plan, and 30% said a student debt/401(k) matching program. It’s a stark finding, as Betterment reported just 39% of small business employees are offered a 401(k) by their employer, and just over half (52%) contribute to a plan.
As a response to rising economic concerns, Betterment found 5% more respondents have changed their investing strategy rather than their retirement planning approach.
“It’s promising that even in volatile times, people are learning that it’s better to stay the course and avoid making sudden changes to their investing strategy,” said Mindy Yu, director of Investing at Betterment at Work, in the research.
Supporting SMB clients
In its research, Nationwide found just 35% of small business owners and 59% of midsize business owners work with a financial advisor. Of those who choose not to, 51% of small businesses said it’s because they’re confident they could handle their business’ finances on their own, compared to 28% of midsize companies who believe the same.
Others believe financial advisors can be too costly (32% small vs. 38% midsize), and some aren’t sure where to find a good advisor (12% small, 19% midsize).
Of the main topics business owners want guidance on are inflation (71% small vs. 88% midsize), rising interest rates (67% small vs. 83% midsize), market volatility (64% small vs. 77% midsize), access to capital (59% small vs. 76% midsize), employee benefits (55% small vs. 78% midsize), supply chain disruptions (41% small vs. 74% midsize), and tight labor markets (36% small vs. 65% midsize).
Changes brought on by SECURE 2.0 provisions can also present opportunities for financial advisors to engage with their small-to-midsize business (SMB) clients. While Nationwide research found business owners indicated a limited understanding of the new legislation, they were knowledgable in key provisions including emergency savings opportunities for employees (41% small vs. 69% midsize), improved long-time, part-time worker benefits (40% small vs. 74% midsize), student loan matching opportunities (35% small vs. 62% midsize), and enhanced startup employer match tax credits (34% small vs. 65% midsize).
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