Advisors often face a big dilemma—what to do about clients who have less than, say, $1 million in assets to manage. Though many advisors want to help that clientele, it becomes more difficult to service them, since such clients require the same attention as clients with bigger pies (yielding more in fees). That question has also raised ethical questions about who advisors are ultimately serving and what the mere “mass affluent” get.
“One thing we’ve learned from our practice management discussions is advisors have struggled to figure out how to serve the mass affluent, emerging affluent investors that may be below their minimum,” says David Canter, executive vice president of practice management and consulting at Fidelity Clearing and Custody. “But these investors want advice. It’s a bull market for advice.”
What’s more, goes the thinking, those mass affluent are going to build wealth and enter the higher echelons. Many advisors know that turning their backs on this segment isn’t the answer, and will be like ignoring money in the street.
To give an alternative to those advisors, Fidelity has partnered with FirstPoint Financial LLC, a subsidiary of Kansas advisory giant Mariner Holdings, to offer a consultative service to its RIAs, one that gets them to look at how they are segmenting smaller clients and developing strategies.
If they like, the advisors can also turn the service relationship over to FirstPoint, which will then share revenue with them on managed assets.
“If you’ve been addressing a certain set of investors as your core offering, you can’t just flip a switch from a business perspective and serve a different client segment without putting a lot of thought into it from a business plan perspective,” says Canter. “Even if technology can be the great enabler.”
Digital platforms have come into vogue as one possible solution to the conundrum of dealing with the smaller investor—even Fidelity, evincing an “If you can’t beat them join them” mentality, partnered with robo-advisor pioneer Betterment last fall,
But even technology can’t do everything, says Canter.
“Technology is just a platform. What we’ve seen advisors struggle with is how to blend in the technology platforms with these investors who may have lower investable assets. So how do you think about it from a branding perspective? How do you think about it as a level of services beyond the investments? How do you think about it from an operation work flow perspective?
“And what’s really interesting and market-changing about FirstPoint is that they said you don’t actually have to do all that work around creating a business plan; we can do that for you and provide a business solution for these clients and prospects.”