Years after the peak of the financial crisis, mass affluent investors remain pessimistic about their finances.

These investors are different now than they were before the 2008 stock market slide, largely because of the disconnect they feel between the recent performance of the market and the performance of the broad economy.

The mass affluent, which have net worth of $100,000 to $1 million excluding their primary residence, often believe they don’t have enough wealth to achieve their financial goals yet don’t feel wealthy enough to afford a financial advisor.

“The opportunity is there, for advisors with the right business model,” said George H. Walper Jr., president of Chicago-based Spectrem Group, the research firm that conducted the study.

According to Walper, a number of advisors have a practice that fits this target market; for them, such clients are worth pursuing. “In addition,” he said, “some firms are starting to segment the lower end of the mass affluent market—say, households with $100,000 to $500,000 in net worth. That’s an underserved market now. To make such clients worthwhile, advisors may have to use a different business model, perhaps one that’s technology-based. Advisors might use more video calls and fewer face-to-face meetings, for example.”

Walper said in a statement that, “Mass affluent investors can benefit greatly from financial advising services, but they’re significantly less likely than millionaires to seek out the counsel of a financial advisor due to perceived risks.” This reluctance leaves them vulnerable to running out of money in retirement and falling short of other financial goals, he pointed out, noting that such investors represent about 28.4 million U.S. households.

The Spectrem report listed these characteristics of the mass affluent:

  • Pessimistic outlook. Fewer than half (48%) of respondents said their finances are better now, compared to a year ago, and only 46% percent expect things will improve in the coming year.
  • Do-it-yourselfers. Only 27% of this group met regularly with a financial advisor. Yet less than one-third of respondents wanted to be actively involved in managing their money and 85% said they had scant investment knowledge.
  • Risk-averse: Less than one-third of the mass affluent said they would take significant risk with a portion of their investments. Indeed, 21% said they regretted not investing more conservatively in the years before the financial crisis.
  • Retirement anxiety: Only 58% of the mass affluent expect to have sufficient income for a comfortable retirement while 40% planned to work past age 65.
  • Family fears. Financial concerns of the mass affluent went beyond their own finances. Close to 60% were worried about the financial situations of their children and grandchildren while more than half indicated they care for aging parents.

As Spectrem’s report explains, “This is the group that bore the brunt of the corporate layoffs of the past few years, after seeing a considerable portion of their savings wiped out in the market crash of 2008-09. Almost two-thirds prefer a guaranteed rate of return for the majority of their assets.” In selecting investments, the primary concern of the mass affluent is the level of risk involved.
How should advisors approach clients who tend to have such concerns? “To work with mass affluent clients,” Walper said, “advisors should learn about their full financial picture. They might have credit issues, for example. Those should be addressed before advisors suggest these investors take more risk with their portfolio.”

Register or login for access to this item and much more

All On Wall Street content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access