In this Section:

How to Reach the Emerging Millionaires Next Door

The emerging high-net-worth market in the United States is thriving and poised for greater growth. With investable assets ranging between $500,000 and $1 million, the emerging high-net-worth segment represents roughly 12 million households — close to 10 percent of all households.

As members of this group focused on building more wealth, their average net worth increased by 23 percent from 2013 to 2016, making them one of the fastest- growing net-worth segments, according to Federal Reserve data. In our Advisor Authority special report, we focused on the emerging high-net-worth consumers to help advisors at every level move the needle for their practices, enhance their current profitability and build a foundation for their firms’ future growth.

Future Millionaires

Today’s emerging high-net-worth individuals are poised to be the future “millionaires next door.” The United States continues to be home to the largest number of millionaires — and the number continues to increase. According to global consultancy firm Capgemini, the number of high-net-worth and ultra-high-net-worth individuals with investable assets of $1 million or more has grown to 4.8 million people in 2016. This represents a 7.6 percent increase from 4.5 million in 2015, and nearly double from 2.5 million in 2008.

According to Credit Suisse, the United States accounts for 41 percent of the world’s millionaires, has six times more ultra-high-net-worth individuals than the next closest country, and has the highest number of individuals in the top 1 percent global wealth group. Clearly, the opportunity for advisors is huge.

Preferences, Priorities and Concerns

Advisors have an opportunity to target this valuable segment of emerging high-net- worth investors by understanding their top preferences, priorities and concerns now — and how these will shift as they accumulate more wealth. What keeps the emerging high-net-worth and other affluent clients up at night — and how can advisors better align to provide the right solutions?

An optimistic outlook: The future is bright. Emerging high-net-worth investors say their financial outlook is more optimistic than many wealth segments — and year over year, this percentage has increased, to 63 percent who said they were optimistic in 2017 from 47 percent in 2016.

Creating confidence is key: Roughly two-thirds (64 percent) of emerging high-net-worth investors have an advisor — and the primary reason by a wide margin is to feel more confident in their financial future (43 percent), with concerns about saving enough for retirement (11 percent) at a distant second.

Protecting assets is a top concern: When asked to rate their top three financial concerns, emerging high-net-worth investors said protecting assets was No. 1 at 43 percent in 2017. The cost of health care was rated second in 2017 at 30 percent. Focused on their bottom lines and their portfolios, taxes were rated third in 2017.

Reach emerging Millionaires

Washington politics affect investing: Washington politics (34 percent) was rated the No. 1 trend in 2017 that will impact the investing approach of emerging high-net-worth investors. Concern about domestic economic performance (30 percent) was rated second, Federal Reserve policy (29 percent) was rated third and changes to the tax code (25 percent) was rated fourth.

Access and responsiveness are important: Emerging high-net-worth and other affluent investors value access and responsiveness. When asked to select their preferred form of communication with an advisor, emerging high-net-worth investors rate phone calls first (40 percent) and face-to-face meetings a very close second (39 percent).

Experience, fee-based fiduciary standard and personalized holistic planning: When asked to select the top three factors that influence them to work with an advisor, these investors rate advisor experience first (54 percent). Compared with other more affluent investors, the emerging high-net-worth place greater importance on a fee-based fiduciary standard, rating it second (31 percent), followed by personalized holistic planning, rating it third (22 percent).

Relationships matter most to emerging high net worth:  These investors say personal one-on-one relationships matter most (52 percent) to a successful customer experience, while quality of communication comes second (38 percent). They are clear that products and strategies should be transparent (26 percent), low-cost (25 percent), high-value (22 percent), and offer more choice (17 percent) to contribute to the success of the customer experience.

Aligning With Affluent Investors

Many advisors say that saving enough for retirement (39 percent) is their clients’ top concern, and the cost of health care has increased in importance year over year (33 percent in 2017 from 24 percent in 2016). But to better align with emerging high-net-worth investors, advisors should also prioritize solutions that can help these clients 1) protect assets and 2) manage taxes.

Likewise, many advisors say U.S. Fed policy (32 percent) will have the most impact on their approach to investing in 2017. But to help reassure their emerging high-net-worth clients and the other affluent investors in their practices, advisors should be sure to address the impact of Washington politics and ongoing gridlock when discussing investing strategies with their clients. An increased focus on tax-efficient investing would be beneficial for their more affluent clients — and their practices as well.

When targeting these investors, less- experienced advisors should consider partnering with more-experienced advisors within their firms and building multigenerational teams. To be consistent with a fee-based fiduciary standard, all advisors should make greater transparency and greater choice a top priority. To provide more personalized and holistic planning, consider partnerships with specialists such as CPAs, trust attorneys and estate planners.

A personal one-on-one relationship is a top priority for emerging high-net-worth investors. And to ensure that these relationships will work, trust must come first. In fact, trust is rated first by the emerging high-net-worth (44 percent) as the attribute that is most important to them in their relationships with their advisors. Advisors also say trust comes first (44 percent), and they prioritize good communication (11 percent) and good listening skills (9 percent) as important attributes of the advisor/investor relationship. However, when working with the emerging high-net-worth individuals, be aware — and be prepared — to address your track record and your approach to adding greater value.

These investors look for a depth of relationship and level of engagement with an experienced advisor who can provide greater value and can put their clients’ best interests first. These affluent investors recognize and see greater value in guided advice. They appreciate transparency, high value, low cost and more choice in their products and services.

As we have seen year over year, registered investment advisors and fee-based advisors rate the pursuit of profitability as their single most important practice management issue. The push for new clients, such as the emerging high-net-worth market, will be an important focus in order to drive success for their firms’ futures.


More from InsuranceNewsNet