Eighty million households have $25,000 in investable assets, according to MetLife, yet until now account minimums of $100,000 and above have prevented this rapidly growing group of up-and-coming investors from getting the investment advice they need.
This is why Jeffrey Wilk and Rebecca Kovatch, vice presidents of MetLife Broker-Dealer Group, have decided to focus the group’s strategy this year on this burgeoning segment of the market.
“You have the do-it-yourself investor who may have been putting $10,000 or $35,000 in an individual retirement account over at
Many have said it couldn’t be done.
At the
The dilemma is that while mass-market clients can rarely afford investment advice and ongoing guidance, advisers can’t afford to work with lower-end clients. Yet MetLife’s new “fund management services,” which offers automated investment advice to the $10,000-and-up investor, allows advisers to access what Wilk calls the “$2 trillion mass market segment.”
How did MetLife do it? Lower minimum investments and overlay management.
By taking the firm’s 10 mutual fund portfolios and working with each of the asset managers to decrease minimum investments. An investor can choose from 98 asset managers. The average account size is $30,000, which is held in a standard brokerage account. The portfolio management roles are then overlaid so MetLife can monitor the client assets against their risk profile so the account can be automatically rebalanced.
In November, MetLife expanded its “fund management services” to all its registered reps.
Kovatch says solutions such as MetLife’s fund management services offer investors more adviser attention—and asset management and advisers more money. MetLife’s fund management services comes with a 1% fee, three times the size of the 25 basis point 12b-1 fee, which may not exist at all by the end of 2010 if
“Once 12b-1 fees go away, advisers won’t get compensated at all,” Kovatch said. “The question is how do you create a solution and get fairly compensated at that level?”
Kovatch said that while many advisers see the Baby Boomer population as their sweet spot, in five, 10, or 15 years from now there’s going to be another affluent generation coming up behind it.
“Today you’re talking to the mothers and fathers, but they have kids [the echo Boomers], and eventually they will want their needs to be met,” she said. “The hardest thing to acquire is the relationship.”
Wilk said emerging investors may have small account balances now, but the idea is that these are the clients advisers should be gaining traction with and growing with to build their future client pool.
Kovatch said that although MetLife always puts the client first, the firm wants to make sure from a practice standpoint that its 10,000 advisers in the field are using their time well. “We don’t want our advisers to spend half a day managing a $10,000 account,” she said. “We want to make sure what we create provides a better solution for the advisor and the client at that dollar level. We want it to be a win-win.”