America's emerging millionaires are well positioned for asset growth but are also in need of more financial planning, according to research released Wednesday by Fidelity Investments.

The study from Fidelity's Insights on Advice series shows that 77% of those averaging $800,000 in total assets and an average household income of $150,000 do not have a written financial plan with 70% reporting they are "not very knowledgeable" about investing. Even so, only 51% said they work with financial advisors and 39% are "choosing to go it alone" with investing. Of those not working with a financial planner, 46% indicated they felt advisors "aren't interested in investors with smaller assets" and 53% were turned off by advisor fees.

While the findings show potential opportunities for advisors, they will need to be cognizant of different characteristics displayed by future millionaires compared to millionaires of other generations, says Bob Oros, executive vice president of Fidelity Wealth Services. Nearly half of the "millionaires of tomorrow" Fidelity polled are from Generation X/Y (49%) and are women (49%).

"You are dealing with someone who is a bit scared by some of the fees that advisors charge," says Oros when describing the attitudes that many younger people in an $800,000 asset bracket tend to have.  "Advisors are going to have to get more creative with creating their fees and possibly how much they charge."

Oros pointed out that one independent registered investment advisor he works with at Fidelity has waived fees for new clients' first two years as a way to attract more people in the near millionaire space and anticipates other planners going the same route.


Some advisors are not adjusting fees but are working to attract younger successful clients by offering extra services. JoAnn May, principal at Forest Asset Management in Berwyn, Ill., includes tax and estate planning in her practice along with assistance in insurance needs.

"I try to give them a lot of value added services," says May. "You have to be well versed in many areas, not necessarily an expert, but at least know where to get answers to difficult situations."

"We have found that this demographic is less sensitive about price and more sensitive about value," says Kevin J. Meehan, regional president for Wealth Management Group in Itasca, Ill. "When presented with this type of service that goes well beyond the investment component, few feel uncomfortable with competitively priced services."


A behavioral trend highlighted in the Fidelity study is that investors on the cusp of becoming millionaires are on top of their financial basics such as debt and household expenses, but are not comfortable taking on risk to maximize returns. Advisors can help clients who are close to the millionaire plateau by shifting them from a saver to an investor mentality, says Oros.

"The challenge for advisors is to get [emerging millionaires] to see the benefits of having a financial plan," he says. "It might require them to think differently about how they market."

Fidelity has previously conducted six studies devoted to millionaires but this is the Boston-based company's first geared toward those close to reaching $1 million in assets. A follow-up study on what type of financial advisor is best equipped to work with emerging millionaires is planned for this year.

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