BROKERAGE SMALL BUSINESS ACCOUNTS INADEQUATE
Serving small businesses is a top priority for brokerage firms these days, but you wouldn't know it from the quality of their offerings, says one recent study.
Corporate Insight, a research and consulting firm for the financial-services industry, examined business brokerage accounts available to small and medium-sized businesses at 14 major brokerage firms and found most of their offerings consisted of little more than dressed-up individual accounts with investment options for idle cash. Just two companies offered “hybrid” accounts — combining banking services with some investment options.
“We found few firms that actually had fully functional small business brokerage platforms versus those that were designed for individuals and simply relabeled as small business,” says Michael Ellison, executive vice president at Corporate Insight and author of the 53-page report, titled Business Investor/Cash Management Accounts.
“Ironically, despite the overall shortfall in the marketplace of the full-service platforms, most of the firms we talked to assured us that they did indeed offer brokerage accounts for small businesses, even if [these] were nothing more than accounts designed for individual investors,” Ellison says.
The U.S. Small Business Administration announced in mid-November that it would provide $12 million in grant funding for 19 new Women's Business Centers (WBCs) and 80 existing WBCs. The centers provide business training and counseling to assist women to start, grow and expand their small businesses.
401(K) DEFAULT OPTIONS: EMPLOYERS CALL FOR HELP
Businesses are going to need help from financial advisors as they choose default investments for their 401(k) or other defined-contribution plans, according to recent research from Putnam Investments. Under Pension Protection Act legislation passed in August, all 401(k) plan sponsors can now include an auto-enrollment feature for employees. More recently, the Department of Labor issued guidance indicating what kinds of investments are appropriate default options: age-based lifecycle funds, risk-based lifecycle funds or professionally managed accounts.
Still, employers seem to be confused about how to choose the best default investment for their own employees, says Putnam's head of retirement research Chris Thompson. Financial advisors can help business clients determine which option is best by measuring the degree of loss aversion their participants have. If employees seem prone to opting out of a 401(k) if and when there is a dramatic downturn in the markets, then the employer should pick one of the risk-based funds. But if the firm thinks its employees have low loss aversion — that they will stay the course — then the age-based option makes more sense.
WHO LOVES YOU?
This 11th annual Small Business Survival Index ranks the 50 states and District of Columbia to determine which ones are most friendly to small businesses.
The index ties together 29 major government-imposed or government-related costs affecting small businesses and entrepreneurs, including taxes, regulatory costs (like health care), workers' compensation and minimum wage.
Here are the top five and bottom five states on that list:
|1. South Dakota||46. Maine|
|2. Nevada||47. Rhode Island|
|3. Wyoming||48. California|
|4. Alabama||49. New Jersey|
|5. Washington||50. District of Columbia|
|Source: Small Business & Entrepreneurship Council|
HSA MARKET EXPLODES
Financial advisors to small businesses have a wealth of new choices when it comes to helping their clients choose the best health savings accounts (HSAs) to offer employees. According to market-research shop Information Strategies, close to 1,100 banks are now offering these tax-favored spending accounts, which were first authorized in 2003. That's more than three times the number of banks that offered them at the end of 2005. Information Strategies projects total HSAs will number 3.6 million with $5 billion in deposits by year-end, up from 1.1 million accounts and $1.2 billion in deposits at the end of last year. As the market gets more crowded, fees are also coming down and the number of other investment options linked to the health savings vehicles is expanding to include mutual funds and reward points.