Attract the Millionaire Next Door

Some advisors aim their services at specific niches like divorced women, or professional athletes, but one advisory firm, Minnesota’s Wealth Enhancement Group, is targeting the "silent majority of America," according to James Cahn, the firm's chief investment officer.

"These clients are the people that are the backbone of America – they make this country great,” he said.

THE SILENT MAJORITY

According to Cahn, in an average U.S. neighborhood, there will be a family who lives above their means, driving a Mercedes, which they can't afford and a huge mortgage. Then, there's the family living comfortably and modeslty within (or far below) their means.

Those people are one of Wealth Enhancement Group’s target clientele. 

"Wealth Enhancement Group is structured to deliver comprehensive financial advice more efficiently," Cahn says, adding that the roughly 140-person firm is very data-driven to be able to pinpoint that ideal client--"the guy wearing sneakers and driving a Ford," he says.

"Our clients are hardworking savers who have accumulated enough assets to retire, but don't look meaningfully different from those people who may only have $50,000 to $100,000 in savings. They are the ‘millionaire next door,” Cahn says. “They didn't inherit their money. They have saved steadily throughout their lives.”

He says his great grandparents, originally from Eastern Europe, would have been Wealth Enhancement Group’s typical clients.

"They saved every penny, and when they passed away, they had a lot of money no one ever knew about," he says of his family. 

UNDERSERVED

Cahn says this audience has been traditionally underserved by registered investment advisors and wirehouses, partly because these clients have been difficult to identify. While many advisory firms attract their clients through networking, Wealth Enhancement Group’s clientele is more difficult to pinpoint; they may not have typical wealth identifying attributes such as a country club membership, expensive homes or cars. They do not sit on the board of the opera.

"And a lot of times their friends aren't as wealthy as they are, and their friends are unaware of that wealth. We need to target the right person because we might be the first person to contact them about their wealth," says Cahn, adding that the firm's communication efforts consist of a variety of marketing channels, including radio, direct mail and public relations. "We're also a very data-driven organization, which helps us identify our ideal clients.”

Furthermore, traditional wirehouses typically target clients whose investible assets are in the neighborhood of $5 million and up, yet the mass affluent market, ranging from those with $100,000 to $2 million in assets, is more difficult to serve because it requires sufficient scale.

OTHER NICHES

Wealth Enhancement Group is far from alone in targeting a well-defined niche. Among high-performing firms with a target client profile, just 3% pursue opportunities outside of that profile (versus 11% for all other firms surveyed), according to the 2012 Fidelity RIA Benchmarking Study.

“The reasons are manifold. Word of mouth serves many planners so well in tight-knit communities that they don’t need to market themselves as much, if at all. And developing an expertise in a complicated niche produces greater ROI when there are more clients that need it,” Financial Planning reporter Ann Marsh wrote in a recent article, profiling planners in highly specialized client demographics.

Read more:

• 8 Successful Advisor Niches
• How to Work With Next-Gen Advisors
• Envestnet to Buy Prudential Wealth Unit