The high-net-worth market is tough to break into, extremely competitive and requires an almost concierge level of service. The middle market is vast and underserved, but it’s hard for many independent producers to generate enough income from this market to make it worthwhile.
So what’s the best market to target for the typical independent producer who hasn’t cracked the HNW code and is frustrated with the apathy of the middle market? For an increasing number of independent producers, it’s the mass affluent market.
The mass affluent market is a marketing term used to refer to the high end of the mass market or the low end of the HNW market. Just how affluent this market is depends on who’s measuring it. Some say it refers to individuals or households with $100,000 to $1 million in liquid financial assets, while others peg it at $500,000 to $2 million.
While this demographic — especially if you top it out at $1 million of investable assets — falls below the minimum wealth threshold required by many HNW-focused advisors, it is an attractive sweet spot for advisors who don’t cater to the HNW or ultra HNW clients.
In the first-quarter issue of “The Cerulli Edge, Managed Accounts Edition,” a report found investors with less than $500,000 in investable assets remain largely underserved by advisors.
“These investors are not the priority of practices targeting the higher wealth tiers, but they represent a largely untapped and profitable market for the vast majority of advisors,” the report stated.
While the fish that make up the HNW market are undoubtedly lucrative, they are also contained by a small pond with many experienced fishermen lining the shores. The mass affluent market inhabits a much bigger pond, allowing the fishermen to spread out.
In 2012, the IRS, using 2007 data, estimated 1.8 million Americans had a net worth of at least $2 million — putting them into the HNW demographic. It is estimated there are roughly 33 million mass affluent households in the United States, and they own roughly 37 percent of America’s liquid financial assets. Roughly 30 percent of American households could be described as mass affluent. That’s a pretty big pond.