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LIMRA INSIGHTS

It Pays to Pursue the Unadvised

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The mass affluent market, defined as those households with $100,000 to $499,999 of investable assets, presents a number of opportunities, as well as challenges, for advisors. 
 
LIMRA recently completed a series of studies on this market to find out who they are and whether they are obtaining professional financial advice.  
 
To better understand where the opportunities in this market lie, we divided the market into three household age groups: Emerging (ages 25-34), Core (ages 35-64) and Retired (age 65 and older).
 
Although most mass affluent households use financial advisors, one-third of households between the ages 25 and 64 do not work with a financial professional, and one-fourth of the households in the 65-plus age group are unadvised. That is a market opportunity of 3 million households representing over $1 trillion in assets. 
 
This sounds great, but where do we find all these people? In the study, we discovered that nearly two-thirds of mass affluents would provide referrals if asked, but only one-fifth recalled being asked to do so. The analysis concludes that the best opportunities for referrals exist in the Retired segment, which could yield 26 percent more referrals for their advisors, and the Core segment, which could yield 11 percent more referrals.
 
We also discovered a variety of reasons why so many are not getting advice. Foremost, 25 percent of mass affluents believe their financial needs aren’t complicated. The beliefe that they can manage finances on their own with family, friends and online tools is why more than one-third do not use an advisor. Affordability of advice and not having enough assets were other reasons cited. 
 
For the mass affluent market as a whole, we know which financial planning activities are most relevant: Nine in 10 are interested in financial planning, 87 percent are specifically interested in retirement planning, and 87 percent indicate that tax advice and tax strategies are applicable to them. For the Core and Retired segments, estate planning also scores high in relevance. A marketing approach focused on these most relevant activities provides a good starting point for reaching the unadvised.
 
The study also revealed that many mass affluent households are self-directed, even those with financial advisors. It’s important for financial professionals to define respective roles clearly in the client-advisor relationship.  
 
Many mass affluents may prefer an omnichannel advice model that allows them to select different methods for different financial activities. For example, they may prefer online tools for simple activities (such as charitable giving), access to a bullpen of advisors with knowledge on specific topics (such as life insurance), and access to a dedicated advisor to develop more complex and personal financial plans (such as financial planning, retirement planning, investments and tax advice).   
 
This omnichannel approach may work to satisfy self-directed clients and still ensure an essential role for the personal financial advisor. 
 
So, even though the unadvised mass affluents say they prefer to manage their own finances, research from LIMRA Secure Retirement Institute has consistently shown that professional advice can make a big difference. Secure Retirement Institute studies show that when mass affluent consumers work with a financial professional, they are more likely to contribute to a retirement plan (78 percent) compared with those who do not have an advisor (41 percent). They also are more confident in their retirement security (71 percent versus 43 percent), and eight in 10 believe their advisor helps them in ways they could not achieve on their own.
 
The opportunity and the need are there for those advisors who are motivated to pursue the unadvised. 
 

James T. Scanlon, MS, HIA, is a senior research director of insurance research for LIMRA, focusing on insurance product and service marketing. Jim may be contacted at [email protected] .


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