Principal launches adviser website to boost succession planning among business owners

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The Principal Financial Group is seeking to involve advisers in its latest effort to get small business owners to plan ahead for their retirement.

In an effort to boost the low level of succession planning among U.S. business owners, the Des Moines, Iowa-based insurance and financial services provider has launched a new website to help retirement advisers guide succession planning conversations. The company wants advisers to promote employee stock ownership plans, better known as ESOPS, as a retirement planning tool.

“We’ve worked with advisers around the country to facilitate many business-succession plans and ESOPs,” says Jerry Ripperger, vice president of consulting at Principal. “While ESOPs are not a new phenomenon, they are underutilized in helping business owners successfully plan their exit strategy.”

More than 70% of business owners in the U.S. do not have a formal succession plan, according to Principal. And even where such a plan is in place, it typically only addresses the issue in the narrowest of terms.

A study by Price Waterhouse Cooper finds that the succession plan at most companies that have one is designed to identify talented individuals and prepare them for leadership roles. In many cases, however, these efforts are focused only on a handful of high-potential executives who are considered next-in-line for C-suite positions. Beyond this small group, the succession planning team often has only minimal awareness of the employees upon whom the company depends.

Ripperger says Principal is encouraging advisers to visit the ESOP benefits website and use it to help guide a dialogue with business owners about their plans for their business once the retire. The site can be used to help business owners see the value of a succession plan, provide answers about ESOPs and determine if an ESOP is the right vehicle to meet their needs.

Using an ESOP, business owners can boost the morale and productivity of their workforce, create a buyer for their business and incur certain tax advantages.

“ESOPs are a smart strategy with multiple benefits for trusted advisers working to help business owners overcome challenges and maximize opportunities,” Ripperger maintains.

Companies that lack the resources to develop their own succession plan can rely on a third-party consultant to provide the necessary guidance and assistance, add the authors of the Price Waterhouse Cooper report. “The proof of a successful succession program,” they say, “is the company’s ability to maintain and grow its competitive position overtime.”

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