In the past, Wealth Managers have primarily focused on high and ultra-high-net-worth (UHNW) clients. The expanding ‘Mass Affluent’ demographic has created an untapped opportunity among mass affluent clients, which has made Wealth Managers reconsider their approach to pursue growth and develop sustained advantages against the competition for mass affluent individuals.

Mass Affluent is typically classified as clients having investable assets between $200,000 -$1 million. They constitute just about 5-10% of AUM for Wealth Managers today.

Mass Affluent is typically classified as clients having investable assets between $200,000 -$ 1 million. They constitute just about 5-10% of AUM for Wealth Managers and Wealth Management firms today. This segment is characterized by the demand for the democratization of services and products offered. Mass Affluent individuals also tend to have high adaptability to newer investment assets, eagerness to understand products/market dynamics, and tech-savvy and heuristic nature. They are seen as drivers of change and growth in the wealth management industry and are potential HNI customers in the near future.

The overall market size of the Mass Affluent is estimated to be in the range of $10-$25 trillion and is expected to have the maximum growth potential. Given the size of the opportunity, all players in the wealth & investment business – Private Banks, Boutiques, Insurance, Brokerages, FinTechs, and even Asset Managers are shifting their attention to this segment of mass affluent customers.

In the journey, they are also realizing that the traditional HNI product and service offerings, with the little tweaks, are not getting the required buy-in from the Mass Affluent client segment. As Mass Affluent clients have their distinct preferences due to age, financial awareness, goals, and technology savviness, they are seeking much higher customization in the products & services.

The other challenges for Wealth Managers and Wealth Management firms are FinTech players, passive investment products, and regulatory oversight, which require transparency in fees and addressing inflation. The combination of technological innovations and the need to cater to the Mass Affluent make wealth management firms look at adopting digital technology while retaining some quantum of penalization and personal touch for mass affluent customers.

As a first step, Wealth Managers need to look at segments within their Mass Affluent client base. One may question the requirement for further segmentation! The answer to this lies in the fact that the Mass Affluent customer segment ranges across a wider age group, different lifecycle stages, income and investment potential, and the type of services required for mass affluent individuals.

Catering to the Mass Affluent segment can compound the already choked bandwidth of the advisors. To balance this, Wealth Managers need to leverage technology & automation to bring in a sharper client focus on their product offerings and fewer but needed customer touchpoints. Today, even the larger players are trending to become adaptive and innovative while addressing the Mass Affluent segment. Apart from the core technology initiatives like legacy modernization and cloud adoption, which many of the wealth management firms have embarked upon and which would address all the client segments, the key focus areas to address the Mass Affluent clients would be:

1. Mass Affluent client connectivity : There is a preference for high tech with human touch and multi-channel connects fueled by tech-savviness. Advisors need to be equipped with tools to connect with Mass Affluent customers from anywhere and customize client communication. Leveraging technology to enable faster adoption of Remote Advisory through Video Conferencing, Co-Browsing, Messaging, and Intelligent AI-driven analytics-based chat, at the same time ensuring compliance and the client’s best interest must also be a priority. Besides, high inflation is expected to be around for a few years. As a consequence, advisors may have to engage in the frequent realignment of investment goals and portfolios to meet customers’ changing needs.
2. Data Management: Adoption of open architecture that enables open banking, use of APIs, and having internal and external data sources aligned for AI/ML apps is intended to deliver greater value to the Mass Affluent. Data-driven relevant analytical insights achieved through account, position, transaction data, integration of third-party wealth data, and contextual market data can bring the benefit of having a total wealth view. Integration with client touchpoints- chat, email, phone conversations, calendar events, etc., further provide advisors with important insights into the stickiness of client, cross-sell opportunities, and account aggregation to enable interactions for goal-based & tailored investments.
3. Analytics Tools: Utilization of analytics tools to help advisors in investment data analysis across current, past, and future investments through interactive charts and dashboards is recommended. The tools should have customization capabilities, like combining multiple analyses into a single view, what-if Scenarios, simulation, and gamification. These capabilities would provide insight to drive meaningful engagements with the Mass Affluent clients, who are tech-savvy & adaptive.
4. Research: Greater customization in research, along with offerings to address the growing impact of inflation is accelerating. Research with broader coverage of asset classes & markets to provide better investment insights enabling informed decisioning and facilitating meaningful client-advisor interactions are also imperative to succeed in the Mass Affluent segment.

Considering the continued potential growth of wealth in the Mass Affluent segments in the coming years, Wealth Managers should start exploring the path of building Innovation Labs in collaboration with their current technology service partners of choice. An emphasis should be on utilizing/building partnerships with FinTechs to address the aspects of the innovation lifecycle, MVP, and building POCs with target quantifiable business benefits. The Mass Affluent segment already has business potential, and this will continue in the coming many years.