Hidden in your existing client roster is a subset of clientswho have been forgotten. I call them the mass affluent, and they're a population of consumers who have been oversold and underserved. Too often we tend to confuse this segment with the middle market, but that's far from who they are.
Profiling the Mass Affluent
The mass affluent are people who:
- Save more than they spend.
- Seek to invest for the future.
- Worry about funding their children's college education, but in most cases won't impoverish themselves because they can cover costs through savings strategies, loans or personal income. In addition, many are not opposed to their children paying some part of their education costs.
- Worry about how they will replace their paychecks when retirement approaches, but in most cases will need to be encouraged to spend more money in retirement.
- Desire to leave a legacy to their children, not to charity.
- In retirement, seek to spend between $4,000 and $10,000 per month.
- Will have between $500,000 and $1.5 million in investable assets upon retirement.
- Maintain a net worth (including property and liabilities) between $500,000 and $2.5 million.
- Would never consider calling themselves high-net-worth investors or millionaires.
Consider the following research: Russ Allen Prince and Associates just published a book entitled The Middle Class Millionaire, based on surveying middle-class Americans with investable assets between $1 and $10 million.
How do you think Americans would feel if they were told that this statistic represented the middle class? Do you think when politicians are lobbying for votes from the middle class, this is who they think they are talking to? Could assertions like these be a reason why such a disconnect exists among what the Financial Planning Association refers to as "the heart of financial planning"those who need financial planning (consumers), those who deliver planning services (financial planners) and those who manufacture products and business-building solutions that support the profession?
As I traveled the country and talked with planners, I learned that the mass-affluent community seeks advice on a wide array of planning issues. While they generally have investable dollars, they also want to explore how their money will affect their lives. However, many of the financial relationships they maintain are built on investment strategies, performance comparisons, technical analyses and tactical repositioning. These clients feel the planning element of the relationship is missing, yet they struggle to articulate it, since their current advisor calls the existing narrow relationship financial planning.
Too many of these clients visit our office with stories of how they felt like small fish in a big pond. They felt an initial sense of security aligning with a big-name firm, but when it came to having their financial planning needs addressed, the relationship would fall short.
The mass affluent seem to be stuck in a world where they want financial planning advice, yet what they buy is primarily investment advice. My personal suspicion is that most planners' client rosters contain a certain percentage of mass-affluent clients. These clients are loyal. They respect your advice. More than anything else, they are willing to open up to you financially, in the hope that you'll build a plan that you will monitor and manage for them together. Can planners build a successful business by exclusively serving the mass affluent? I know it can be doneand you can do it too.
Marc S. Freedman, CFP, is president of Freedman Financial in Peabody, Mass. This article is adapted from his book Oversold and Underserved: A Financial Planner's Guidebook to Effectively Serving the Mass Affluent (FPA Press) and is reprinted with permission of the Financial Planning Association.