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Financial Literacy Gaps in Small Businesses Present A Huge Opportunity for Advisors

And what the huge jobs surprise means for interest rates

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Happy Sunday everyone, and welcome to Benzinga’s financial advisor newsletter.

Today we’re discussing the vast untapped market for tax optimization, cash flow management, and other financial advice among small business owners.

So, let’s get into the Industry Chatter!

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INDUSTRY CHATTER

A recent survey by Xero has uncovered a significant opportunity for financial advisors to expand their client base among small business owners. The study reveals a stark contrast between entrepreneurs' perceived financial acumen and the fiscal challenges they face in reality.

While 55% of small business owners rate themselves high on financial literacy, half have encountered fiscal challenges due to knowledge gaps. More concerning, 15% report they haven't recovered from these setbacks. This disconnect between confidence and competence in financial matters presents a clear opening for advisors to offer their expertise.

Help Needed All Around

Key areas where business owners struggle include:

  • Tax optimization (18%)

  • Budgeting (16%)

  • Understanding financial metrics (16%)

  • Cash flow management (16%)

These pain points align perfectly with the skill set of financial advisors, positioning them to provide targeted solutions.

The survey also uncovered generational differences in business formation, with 67% of Gen Z respondents starting as side hustles compared to 48% of Boomers. This trend towards entrepreneurship from side gigs creates a new demographic of potential clients who may need guidance in transitioning to full-time business ownership.

Mixing Business With Personal

Financial advisors can capitalize on the fact that 61% of respondents used personal savings to start their businesses. This presents an opportunity to offer services that balance personal and business financial planning.

Moreover, only 38% of small businesses have an emergency fund, and 13% lack any plan for unexpected costs. Advisors can leverage this data to emphasize the importance of financial planning and risk management.

Huge Untapped Market For Advisors

Perhaps most critically, only 16% of business owners currently use an accountant or advisor. This low utilization rate suggests a vast untapped market for financial professionals.

By highlighting their expertise in areas where business owners struggle and emphasizing the value of professional financial guidance, advisors can position themselves as essential partners in small business success. Offering tailored services that address these specific pain points could help advisors acquire new clients and contribute significantly to the financial health and growth of small businesses.

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MARKET RECAP

It was a relatively flat week for major stock indices as traders opted for caution following the rallies of recent weeks and amid intensifying conflict in the Middle East.

On Tuesday, Iran launched a barrage of missiles at Israel, retaliating after Israeli forces announced the killing of Hezbollah leader Hassan Nasrallah during airstrikes in Beirut.

Israel mulling a counterattack against Iran caused oil prices and energy stocks to surge, driven by concerns over supply disruptions in a critical oil-producing region. A basket of U.S. oil and gas stocks, the Energy Select Sector SPDR Fund (XLE), recorded its strongest weekly performance in two years.

Major Chinese tech giants, as tracked by the iShares MSCI China ETF (MCHI), saw another week of strong gains driven by heightened investor enthusiasm for domestic stimulus policies.

The U.S. labor market continues to defy gravity. In September, 254,000 new non-farm payroll jobs were added, significantly beating forecasts.

The unemployment rate dropped more than expected, and wages grew faster than anticipated. As a result, market participants and economists are rethinking the need for further aggressive interest rate cuts by the Federal Reserve.

US-Israel Talks Propel Oil Prices

Oil prices rallied when President Joe Biden said the U.S. is in discussions with Israel about potential strikes on Iranian oil facilities. The geopolitical tensions and potential military action have raised concerns about the stability of energy markets, contributing to the surge in oil prices.

Zuckerberg’s AR Vision

Mark Zuckerberg suggests Meta Platforms Inc.‘s (META) upcoming AR device, Orion, could become the next major tech shift after smartphones. He sees augmented reality as a transformative force, with Orion possibly leading the charge in a new era of immersive, wearable technology, revolutionizing how people interact with the digital world.

Cramer’s China focus

Jim Cramer highlights that investor “hot money” is shifting from Nvidia Corp. (NVDA) and Apple Inc. (AAPL) toward Chinese stocks. He advises those interested in the Chinese market to focus on Alibaba Group Holding Limited (BABA), emphasizing it as a key player amid the growing investment interest in China's tech sector.

Ford EV growth

Ford Motor Co.‘s (F) U.S. electric vehicle sales gained momentum in the third quarter despite a slowdown in its top-selling Mustang Mach-E SUV. The Michigan-based automaker experienced strong performance from its F-150 Lightning and E-Transit models, bolstering its efforts to expand its presence in the U.S. electric vehicle market.

THE WEEK AHEAD

Economic Data

  • Monday: US consumer credit data

  • Tuesday: US EIA short-term energy outlook, import/export numbers

  • Wednesday: FOMC meeting minutes, US crude oil inventories

  • Thursday: US inflation numbers

  • Friday: US Producer Price Index

Earnings

  • Monday: Duckhorn Portfolio (NAPA)

  • Tuesday: PepsiCo (PEP)

  • Wednesday: Helen Of Troy (HELE)

  • Thursday: Delta Air Lines (DAL), Domino’s Pizza (DPZ)

  • Friday: JPMorgan Chase (JPM), Wells Fargo (WFC), BlackRock (BLK)

WHAT THE PROS ARE WATCHING

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