Reports Of The High-Net-Worth Market Being Saturated Are Highly Exaggerated

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One of the persistent myths regarding the high-net-worth market is that it is a mature or saturated market as it relates to the opportunities available to sell and advise on financial products and services.

This myth typically is embodied in comments such as “everybodys chasing the high end of the market” or “the affluent market is crowded.” Such observations often emanate from industry pundits who, for whatever reason, are intent on directing more marketing efforts toward the middle market. And while there is no question the middle market in this country is woefully underserved when it comes to financial products and services, research also shows that opportunities continue to abound for sales in the upper end of the market.

While many surveys ask consumers about their financial goals, we believe a more meaningful measure of market opportunity is obtained by asking consumers where they currently stand in relation to the achievement of their financial goals. The results from the 2004 Phoenix Wealth Survey show the percentages of high-net-worth consumers (defined as households with net worth in excess of $1 million, excluding their primary residence) who are still working to accomplish their financial goals.

With the exception of “financing childrens college expenses,” which is not surprising given the age demographics of this market, half or more of the households in this market are still “in progress” when it comes to achieving financial goals. Conservatively stated, at least one out of every two high-net-worth households is still working toward one or more financial goals!

The more traditional way of viewing the sales opportunities in this market is by examining the incidence of product ownership and future purchase intentions, which point to significant opportunities in this market.

With the exception of long term care insurance, the future purchase intentions reported by high-net-worth consumers do not exceed 5% for any of the financial products and services listed. These numbers may seem low, however, just 3% translates into approximately 185,000 high-net-worth households. Five percent projects a total of approximately 308,000 households. Moreover, it can be argued that these purchase intention statistics may be underestimates because some respondents might be unwilling to report their intent to buy a product out of fear the survey is a veiled sales attempt.

The aspect of these results that speaks to the opportunities that abound in the high-net-worth market, however, lies not with the percentage of the market that doesnt own the various products listed nor with the number of households represented by the purchase intention statistics. Rather, the story lies in the huge disconnect that exists within the data. While more than half of the high-net-worth have yet to achieve their financial goals, most also do not own the various products that could see them through the accomplishment of these goals.

The low percentages of consumers who plan to buy products that offer the means to achieve their goals suggest that many in this market are unable to make the connection between financial products and a plan to the accomplish their financial goals. Herein lies the opportunity for todays advisors.

is senior vice president, business and market research for The Phoenix Companies, Inc., Hartford, Conn. He can be reached via e-mail at walter.zultowski@phoenixwm.com.


Reproduced from National Underwriter Edition, October 7, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.