Entrepreneurs are more likely to consider property investment rather than a pension to build their wealth, according to research from Brown Shipley, a Quintet private bank.
The survey among entrepreneurs and wealthy individuals in the UK found that entrepreneurs are more likely than wealthy individuals overall to have amassed wealth through investment in property, and less likely to have done so through a pension. Almost a third of entrepreneurs (30%) state that property investment is a main reason for their wealth, compared to 21% for wealthy Brits overall. While 44% of wealthy individuals in the UK highlight their pension as a main reason for their wealth, this falls to 28% for entrepreneurs.
Property investment (30%) and inheritance (31%) are the second most cited reasons for wealth among entrepreneurs, preceded only by salary, for which around half of entrepreneurs (51%) say is a main reason for their wealth compared to 64% for wealthy Brits overall. Over a quarter (27%) of entrepreneurs say that entrepreneurialism and proceeds from a business are a key reason for wealth. More than one in six entrepreneurs (15%) say that a lottery win or gambling has had a material positive impact their levels of wealth, almost double the amount for wealthy individuals in the UK overall (8%), suggesting they may take a different approach to risks with their finances.
Just over half of entrepreneurs (51%) plan to use their wealth to provide an income in retirement, versus 61% for wealthy individuals on the whole.
Gordon Scott, Head of Client Solutions at Brown Shipley, said: “There is an obvious additional financial risk that comes with working for yourself, with capital tied up in the business and director salaries dependent on business performance, which may explain why many entrepreneurs look to bricks and mortar for broader wealth generation. For the same reason, some entrepreneurs might be less willing to put their money into other companies through a pension, which will tend to be primarily invested in stocks and bonds.”
“Working for yourself can mean that some of the more traditional ways of saving for the future and amassing wealth – such as a pension – can be forgotten. Entrepreneurs, by their nature, will have a lot of their potential wealth tied up in their business endeavours. Business planning can often overtake personal wealth planning, but it is important to ensure the two align. We encourage our entrepreneur clients to look at their wealth and plans holistically, and ensure they are managing risks and making the most of tax allowances, such as those offered through pensions.”