Advisors Have Potential in Mass Affluent Market

According to a new study by LIMRA, financial professionals may need to set their sights on an as-of-yet underutilized market of clients. Inhabiting the upper bounds of the income and asset spectrum, the so-called mass affluent market could be a new target for growth with the right strategies.

The market profile of the mass affluent is unique and evolving, both presenting obstacles in attracting these customers. According to research by LIMRA, the largest part of this segment is comprised of retirees ages 65 to 74, with with investable assets in the range of $100,000 to $499,000. Nearly 6.9 million households fall under this categorization. Being retirees, however, these households don’t rank very highly in income, averaging only $63,235. The core of the mass affluent market, as well as their emerging cohort, may present an even stronger case for capitalization. The core of the mass affluent market, comprising about 5.4 million households, holds as much as $2.1 trillion in assets, and represents more than $740 billion in income.

Window of opportunity

LIMRA’s research found that 3 million of these mass affluent households don’t currently enlist the services of a financial advisor. This represents more than one-third of the emerging and core segments of the market, and approximately $700 billion of their assets are not currently under advisorship. The reasons for not using a financial advisor are complex, but mostly consistent within market segments. One-third of mass affluent clients don’t use an advisor due to the belief that they can manage their finances better on their own.

To attract more mass affluent clients, LIMRA recommended pursuing a targeted approach. In a survey of mass affluent clients currently using advisors, respondents were asked to report if their advisor requested referrals from them. LIMRA then calculated the differences between this rate and the number of respondents who reported their willingness to refer an advisor to someone. Their results found a large opportunity to capitalize on referrals among retired mass affluents, with an estimated yield of 26 percent more clients were it not for missed opportunities. The core of the mass affluent market could see 11 percent more business from referrals.

Communication is key

Reasons for discontinuing the relationship with a financial professional were also covered in the LIMRA study. Mass affluent clients were polled on their reasoning for leaving their financial advisor in the last year, if applicable. The survey revealed as many as 26 percent of these unhappy clients chose to leave because the “advisor was no longer right for me.” “Relationship management” was also a primary concern, with 13 percent of respondents citing this as the reason for leaving their advisor. LIMRA researchers interpreted this to mean that mass affluent clients are more concerned with effective communication between themselves and their advisor, and perhaps place less weight on financial results or even cost of service. Despite these results, LIMRA found the core and retired segments of the mass affluent market each showed a 95 percent retention rate.

In effectively targeting the mass affluent market, financial professionals should synthesize all of this information into a strategy that emphasizes communication and value of service. According to Financial Planning, mass affluent clients also enjoy feeling like they are getting in on an exclusive deal. While these clients aren’t yet at the levels of income and assets that the most high net worth individuals can boast, they still are attracted to an experience out of reach to the average consumer. Advisors should take note of this, and demonstrate the benefits of their services rather than a simple lack of penalties. With these key points in mind, financial professionals can go about effectively targeting this growing and underutilized market.

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