INSURANCE STRATEGIES FOR YOUR SMALL FINANCIAL SERVICES BUSINESS
Is There A Future For The Small Financial Services Business?
An Overview Of The Financial Services Industry In The US
Many small business owners are wondering whether insurance for financial services businesses will protect them in this big industry. The US financial industry is the largest and most liquid industry in the world. In 2018, finance and insurance companies contributed 7.4% (or $1.5 trillion) to the GDP. This sector of the economy employs more than 6.3 million people. Despite the fact that because the industry offers the greatest array of financial instruments to allow consumers to manage risk and create wealth, small financial services businesses are vulnerable. Statistics show that 20% of small businesses fail within the first two years and 50% fail within five years. Reason behind is that small business owners need business strategies that should differ from those of large firms, but they often lack training in these strategies. Small businesses in the US financial services industry are not immune to this.
For instance, financial planners are trained to provide planning services that include debt reduction, asset accumulation, retirement, estate planning, and tax planning but this training is mainly focused on technical expertise and does not include marketing techniques or business operations. Lack of sufficient skills expose their businesses to a high risk of failure. It doesn’t seem encouraging that Small Business Administration USA reports that the number of small businesses is declining.
Business Technology Makes It Hard For Small Financial Services Businesses
Over the past 20 years, the number and complexities of federal regulations have increased at an alarming rate. These regulations have imposed more of a burden on small businesses providing financial services than on large businesses.Ten years ago the financial services industry saw a trend in certified accountants and bookkeepers to start their own outsourced accounting practices. Making these successful has not been as easy as it seemed at first. The next two years will see a lot of consolidations and shops closing. Some of the reasons for this include increased regulatory oversight with additional levels of scrutiny, the increasing cost of running a small businesses, the high cost of changing to digital solutions and technological innovations, and the rising risk of litigation and professional liability claims.
The financial management consulting industry is a $250 billion industry. It is growing and profitable but is prone to disruption. According to IBIS world, the financial management consulting industry is in mature stage of its life cycle. Although, this industry is in growth phase in line with the overall economy but increasing number of industry players and technological innovations are risk factors for this sector. Free online tools serve the needs of some clients who favor technology over consultancy. Small management consultants need to be aware of the competitive forces that affect their industry so they can develop strategies to help establish and maintain their position in the industry. But the dangers are real. For instance, a data breach is a growing concern for small scale financial service providers, especially, since they do have enough resources to adopt preventive systems.
The Need For Preventative Measures
If preventative measures are not adopted in time, there is a real risk of business failure. To keep running the business successfully calls for assessment of existing business strategies, identification of potential risks and timely adoption of their mitigating policies. One of the most valuable of these is insurance coverage. It is wise to secure insurance for financial services businesses. Every small business in any industry is vulnerable to accidents, theft, data breaches and worker or third party injury.Preparing against unforeseen dangers is vital. Business owner policies that are customized for your small business will allow you to keep your doors open even when faced with liability claims and legal costs.
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