Financial markets are shifting, and advisors are becoming more open to serving mass affluent clients, said Frank Paré, the Financial Planning Association’s president.
“More players are starting to come into the market to serve the emerging mass market,” Paré said during a meeting with Financial Advisor magazine. More mass affluent clients will need to be served in the future, and the solution is not robo-advisors, he added. Many advisors target high-net-worth clients, rather than the mass affluent.
“A digital investment management platform is all right in a bull cycle, which is where we have been,” Paré noted. “Some people hold up robo-advisors as the wave of the future for financial planning. But when we hit a bear cycle and people are trying to figure out what to do with their investments, they are going to want to talk to a real person.”
Evelyn M. Zohlen, who will serve as the FPA’s president in 2019, added that robo-advisors will have a place in the industry—but only in the same way insurance planning and estate planning do. Each is one part. None is the whole.
According to Cerulli Associates’ 2018 advisor survey, 40 percent of advisors have mass affluent clients, households with $500,000 to $2 million in assets, as their core market. (Cerulli surveyed more than 2,000 financial advisors across advisor channels).
A specific group of potential investors are driving the need for more mass affluent advisors. They are the "high earners, not rich yet" or Henrys with household incomes of $100,000 to $250,000. “Henrys are the new face of the mass-market customer,” Pare said. It is critically important for all marketers, including financial advisors, to understand this group. Henrys offer growth possibilities unmatched by the middle-class consumer segment. While the overall number of households grew only 2.5 percent between 2010 and 2013, the number of Henry households rose 11 percent.
There is also going to be a need in the near future for financial professionals to define for the Henrys and others exactly what a financial planner is in order to capture that market, Paré said.
“We have to define in practical terms what financial planning means” in order for the profession to grow and to help more clients, he added."I believe the process of simply packaging a financial product to appeal to the mass-affluent market is starting to fade has financial planning services gains wider acceptance."