Just as fashionistas once declared that pink was the new black, the mass affluent consumer is on the verge of overtaking the high-net-worth client as a desirable customer base for retail banks, according to an HNW Inc. survey released on Tuesday.
But the majority of mass affluent customers don’t consider advisors from their primary banking institution as good resources for advisory and financial planning services, according to New York-based HNW Inc.’s survey of 422 individuals with $100,000 to $3 million in liquid investable assets including rollover 401(k)s.
“The ’new black’ is the mass affluent consumer,” said HNW CEO Stacey Haefele at a media lunch, noting that these customers represent a huge yet overlooked opportunity for advisors in the retail banking space. “There are plenty more of them than high net worth individuals.”
A significant 76% of survey respondents said they do not use their primary bank for investment or brokerage accounts, and the vast majority, 78%, had never considered their primary bank as an option to provide advisory services.
Trust Is an Issue
“In fact, 30% go so far as to note that they don’t trust using an investment advisor at their primary bank,” says an HNW news release. Further, 42% did not believe that their primary bank was the best option for investment and brokerage account services.
Haefele, whose independent marketing firm paid for the research out of its own pocket, would not name the banks that survey respondents mentioned, but she did say that they covered a range of community, regional and big banks.
“Caught between two worlds—the middle class and wealthy—the mass affluent are looking for solutions and advice, but failing to find it from advisors within the retail banking space,” Haefele said in a statement. “Retail banks have an opportunity to tangibly demonstrate worth by getting customers to consider them for their investment needs.”
Bank Advisors ‘Not the A Team’
Survey respondents often felt that in house-bank advisors “are not the A Team,” a problem that underlines how retail banks ignore their mass affluent customers and fail to capture their investment dollars, Haefele said.
“Are the best advisors sitting in a bank branch or a brokerage or an independent advisory?” Haefele asked, adding that another cross-selling hurdle comes from brokerage advisors’ lack of appetite for selling in-house products. “If Joe or Suzie Advisor from Merrill Lynch doesn’t like Bank of America products, they’re not going to sell them.”
Leslie Paladin, senior vice president and managing director of retail banking at HNW, asserted that banks must do a better job of communicating to their mass affluent customers about their services and advisory expertise if they want to compete with wirehouse and independent advisors. She added that banks would do well to push advisors to “work within the ecosystem of the brand.”
Read Young Investors’ Assets and Loyalty Up for Grabs by Wealth Managers at AdvisorOne.