Small businesses face big challenge in retirement… and other news this month

Here are a few of the biggest stories from the financial world of small businesses that happened in the past month and how they affected you. Can you catch them?

1. Small businesses face big retirement challenges

Not enough Americans save for retirement, and part of that responsibility rests with their employers. In fact, 55 million workers do not have a retirement savings plan at their workplace.

“Unfortunately, retirement plans are often too expensive or too difficult to offer small businesses, so these companies need to,” said John Arensmeyer, founder and CEO of Small Business. options that are easy to manage and also make sense for the bottom line of small businesses. Majority, an advocacy organization for small businesses and freelancers. (The source: Investment News)

Carried away:

With all due respect, I couldn’t disagree more. Setting up a simple 401(K) plan is very cheap – in fact, some banks are free to set up or only charge a few hundred dollars. Once incorporated, your employees can contribute pre-tax dollars for their retirement, and you can contribute if you wish. And you should! The more your employees save for their retirement, the more you can save for yourself. Plus, if you’re competing for workers in this very low unemployment economy, having a retirement plan is a boon.

Chart source: American Banker

2. Fintech providers are constantly innovating themselves and banks struggle to keep up

The banking industry is in a slump. According to a recent KPMG report, there were 70 mergers and acquisitions among fintechs in the US, Canada and South America in the first quarter with deals totaling $3.4 billion. The value of deals in the second quarter, although less in volume, reached 6 billion USD.

All of this is troubling fintech providers in the industry. But this turmoil is creating an opportunity for smaller banks, which now have better access to technology than ever before that was only available to larger institutions.

“It could be augmented reality, virtual reality”; It could be the need for “analytics-based tools or the internet of things,” said Mark Ranta, head of digital banking solutions at payments provider ACI Worldwide. . “The breadth of what banks are looking at has opened up quite a bit compared to what the traditional lines were before.” (The source: Bank of America).

Carried away:

I see an increase in our SMB clients who choose to work with smaller, independent and community banks over larger, multinational financial institutions.

So far, the choice has been made based on their perception of a better level of service and is more personal. Because these banks are smaller, their technology services (like mobile banking) are uncomplicated and for many of my clients that’s been a hindrance. Going forward, however, it seems likely that those smaller banks will soon offer more advanced technology, and this will only improve their competitive advantage over SMBs.

3. Silicon Valley’s invasion of the banking sector just took a major step forward for the US

The US government is officially sanctioning online lenders and other fintech lenders with the issuance of a special national charter issued by the Office of the Executive. Traditional banks are not pleased that these emerging banks can now function as full-fledged financial institutions, as long as they are prepared to comply with a series of federal regulations. But the new regulation gives these lenders much more credibility in the eyes of investors and borrowers.

“Providing a pathway for fintech companies to become national banks can make the federal banking system stronger by fostering economic growth and opportunity, modernization, innovation, and competition.” ,” said CEO Joseph Otting. Applications will inevitably face “high scrutiny” and will need to demonstrate their creditworthiness by demonstrating sufficient capital, liquidity, and the ability to make other financial commitments . (The source: Bloomberg)

Carried away:

Online lending companies have been operating at the edge of the financial world, although the industry has grown rapidly over the past few years. Now, these lenders – many of whom provide much-needed capital to startups and other small companies that struggle to get capital from a traditional bank – are finally getting the credibility they deserve… of course they earn it during the charter process.

Chart source: Pew Research Center, pewresearch.org

4. For most US workers, real wages have barely budged for decades

Unemployment is down and competition for labor is fierce. Still, wages are low – and they’ve been around for a long time. Recent research shows that today’s real average wages (after accounting for inflation) have the same purchasing power as 40 years ago, and only the highest-paid workers benefit from wage increases. significantly.

Also, according to Paychex Small Business Employment Monitor IHS Markit, job growth in small businesses is falling, and so are wages as of this July. The report suggested that tax reform may not boost the economy as much as expected. (The source: Pew Research; Paychex; Accounting Today)

Carried away:

There are many theories about this phenomenon that certainly make sense. For example, many employers are substituting benefits such as health, retirement, and paid time off for pay increases. The decline of unions and the lagging skillset may also be to blame. But I think there’s a big thing going on here: employers, especially smaller employers, who represent more than 50% of employers in this country, simply salary is not enough. Minimum wages are historically low, and hourly employees have barely kept up. Some of my clients say they can’t pay more.

That may or may not be true. But they are losing good people to bigger bosses that pay more. With unemployment so low, many workers are moving to larger corporations or companies that offer better benefits. The solution to this problem doesn’t appeal to many of the small business owners I know: to get workers, we’re all going to have to start paying more, and that’s just a fact. Once that sinks in, I bet we’ll not only see jobs at small businesses rise, but wages too.