Going in Depth on the Mass Affluent Market

The financial services industry has undergone significant change in the last few years, and this state of fluctuation doesn’t appear to be letting up any time soon. First there was the financial crisis, still less than 10 years ago, which threatened the American economy in general but also the world of finance in particular. From simply running the numbers, the market has generally recovered from the recession in terms of revenue and profit. However, its effects on the attitudes and goals of consumers continues to be studied and debated.

Since the 2008 recession, a new generation of wealthy consumers have joined the economy and are in need of financial guidance. However, this new group also brings new demands and challenges for the finance industry. A new study from LIMRA takes a look at the emerging class of young, affluent Americans who present plenty of opportunity for financial professionals who can meet their unique needs. The goal of the study, according to LIMRA, was to give advisors and others in finance the tools they need to gain this market’s trust.

“Without an adequate understanding of the consumer mindset, it’s difficult to create effective strategies for communication, distribution, product development, and customer service,” the study’s authors wrote. “This information can be valuable in developing effective communications, reaching current and prospective customers, and supporting the financial professionals who serve them.”

Key findings

As a demographic comprising more than 13 million households with total combined asset holdings of nearly $3 trillion, the mass affluent market is a tough one to pin down. They tend to skew older, with most households falling under the retired segment. However, emerging mass affluent members, who range in age from 25 to 34, already control a combined $342 billion in assets, not much less than the $409 billion held by retirees. And, with such a broad age range, it’s easy to assume that these potential clients have little in common.

Young, affluent consumers present the greatest potential for financial professionals.

Young, affluent consumers present the greatest potential for financial professionals.

In fact, members of the mass affluent market have plenty in common with one another, even across demographics. A few of the most notable commonalities LIMRA found in its study include:

  • Mass affluent household members generally prefer personalized, face-to-face interaction with advisors, brokers or other financial professionals.
  • More than half of the market reported confidence in buying products via direct-to-consumer organizations. They also tended to be receptive to online tools used to plan and purchase investments.
  • Mass affluent households tended to respond well to intersectional products and services. Organizations that offer a broad range of financial products will find it cost-effective to enroll clients in a spectrum of services.

Targeted approach

While there are several characteristics shared by the entire mass affluent market, LIMRA suggested a few strategies for companies who can pinpoint select segments and achieve considerable success. Perhaps the most potential lies in the emerging mass affluent crowd. Not only are these consumers already quite wealthy, but they overwhelming reported holding financial professionals in high regard. In fact, 61 percent of emergent mass affluent members told LIMRA they trusted the advice of an advisor or broker, compared to just 55 percent of the core of the market or retirees.

What’s more, evidence suggests that younger mass affluents are looking to maximize their long-term investment potential, but will need the help of financial professionals to get there. According to a recent survey from a partnership between Merrill Lynch and Bank of American, 41 percent of millennials reported a willingness to retire as soon as they hit a certain financial milestone. For comparison, most older investors planned their investment goals around a specific age of retirement.

Emerging mass affluent market members are younger, making good money and want to put it to work by retiring early, ostensibly to pursue personal goals other than corporate success. To achieve this goal, they are going to need the help of experienced financial professionals who can help investors cover all the bases of investments and insurance. The evidence suggests that the emerging mass affluent members want and need this guidance. Clearly, it would be beneficial to everyone if financial professionals began marketing their services to younger, wealthy individuals. As it stands now, this would prove a valuable investment for both parties.

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