The Mass Affluent: The Low-Hanging Fruit of Financial Services Companies
The mass affluent — who are they, and where are they located? What are they looking for in traditional financial institutions? While this growing segment of financially robust consumers may not be ready for “private banking,” they represent the “low hanging fruit” for many financial services companies’ most profitable offerings, investment and lending products. In part one of this two-part series, we broadly identify mass affluents and how to reach and cultivate them as customers.
Big earners, big assets
According to Equifax – IXI Services WealthComplete, the mass affluent population has between $100,000 to $1 million in investable assets per household, with average household assets of $312,000 and an average household income of $118,000 per year. They make up roughly 27.8 million households in the United States, with total assets of $8.7 trillion — quadruple the assets of the mass market segment. While the average age of the mass affluent is 56 years, taken together, millennials (ages 18–33), and generation X (ages 34–49) represent nearly one-third of investable assets in the mass affluent segment. Where can you find these people? Most of them are living in major East and West Coast cities, though many areas across the US are nurturing millennial mass affluents.
Identifying and reaching the mass affluent using advanced tools
Due to widely diverse ages and life stages, identifying and reaching the mass affluent hasn’t been easy. Cross-selling them from checking and savings accounts to upper-end products when they first become customers has posed problems for many financial services firms due to underdeveloped onboarding processes and analytic capabilities. Plus, many mass affluents still believe banks can’t give them the investment products they need.
Enrolling these customers in a bank’s top-tier service level and knowing when to offer them investment products calls for insights drawn from sophisticated data-gathering capabilities. Banks need to be aware of a customer’s likely total wealth, income and spending habits. An asset allocation profile is also important, one that reveals how various invested funds are diversified — such as likely stock and mutual fund balances. It’s also helpful to analyze a customer’s estimated debt load and borrowing needs and habits. Resources provided by Equifax offer a number of effective tools to tap into the potential of mass affluents.
Grow organically; communicate proactively
To engage existing mass affluent customers, banks need to grow them organically from deposit-only customers into lending and wealth management services. Banks can also become more proactive by offering their services through online options. Here, the emphasis should be placed on today’s younger mass affluents that have not yet been targeted by brokerage firms and other financial planners. The key is to create a “start early” personalized plan of wealth management. New technologies, such as in-branch touch screens and video conferencing with advisors, can be used to attract millennial mass affluents.
Data vs. useful data
When mining data to leverage mass affluent “reach and results,” banks may want to use a foundation of direct-measured wealth data that can be applied to all US consumers to create more accurate models and lower marketing costs. Census-acquired or bank survey data may be less accurate, as they offer an incomplete view of the customer. Instead, leveraging a broad view of a consumer’s likely financial profile, including information like estimated total assets, behavioral and demographic trends and likely financial capacity, can steer marketing efforts toward those consumers with the most growth potential and promoting specific investment and lending services. Goals can include everything from college or retirement strategies to home improvement.
The bottom line? When financial services firms have the right tools, mass affluents can be the low-hanging fruit for an array of profitable banking products. Part two of this series explores the diversity of mass affluents and the specific financial products each cohort needs.
Image sources: Equifax, morgueFile
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