The choice of a financial advisor can be one of the most important decisions we make. As much as we would love to believe we are capable of handling our own finances, the reality is that most of us could use a little professional help.
In an ideal world, a financial advisor would be there to help us every step of the way, but do you, like many investors, feel your needs are overlooked or your accounts are underserved?
Many advisors seem to spend more time and energy attracting business than they do managing it. While they value your money, they do not always give you the attention you were promised before you signed on the dotted line.
If you feel this has happened to you, you are not alone. A great number of investors feel this way. To understand why this is happening, you need to first understand how your advisor views you and your business.
There is a good chance that you fall into a category known as the “mass affluent.” If this is a new term to you, it is the classification given to a large number of Americans who have significant savings, but don’t have enough liquid assets to get the red-carpet treatment that banks roll out for high net-worth clients.
Let’s take a closer look at who is considered a member of the mass affluent. Here are a couple of traits that apply to many in this group:
- Households with net assets between $100,000 and $1,000,000
- They save more than they tend to spend
- Always try to save for the future
- Worry about having enough money in retirement, but will usually continue to spend frugally in retirement and leave a significant inheritance
- Start saving early for their children’s college, but remain more focused on their own savings, realizing that retirement saving is more important
- Are not opposed to their children paying some part of their own college expenses
- Live in nice housing, but are careful not to buy more house than they can afford
- Desire to leave inheritance behind for their children, not to charity
Obviously the above are just a few characteristics, but you start to get the idea. The mass affluent are typically college educated, over the age of 35 and have a strong desire to save and plan for the future.
It is not hard to understand why the mass affluent are so attractive to financial advisors. Their strong desire to plan for the future is exactly the sort of client that advisors want.
But you can also begin to see why they may feel underserved. In most cases, advisors are able to sell these types of clients on long-term investment strategies. Once these plans are set in motion, they require little, if any, attention. Many advisors prefer to focus on high net-worth clients who’s larger accounts generate much higher fees.
The mass affluent tend to have enough investable assets to be attractive to advisors, but they may not have enough to warrant special treatment. The fact that the mass affluent make up such a large portion of the population means that advisors can afford to lose one or two of these clients now and then without taking a big hit to the bottom line.
If you are one of the mass affluent, the good news is the situation may be shifting in your favor. The bad news is that there are fewer of you than there used to be.
The polarization of wealth in the U.S. in recent years has led to a shrinking of the upper middle class, and consequently the mass affluent. Some have managed to claw their way into the upper class, while the less lucky ones now find themselves firmly among the middle class.
For the unlucky ones who have fallen, they no longer find themselves having much extra money to invest or save. The lucky ones who have climbed the ladder are finding that banks and financial advisors are more interested in their business.
As a result, the number of mass affluent families has declined and now financial advisors are starting to view them with greater importance. They simply can no longer afford to lose these clients as they once could.
Mass affluent households now hold more leverage, and they should be using that leverage to ensure that their managers are devoting as much attention their accounts as they deserve.
Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va. His articles typically cover big-picture events and forecasting what impact they will have on the stock market. In addition to writing for Fresh Brewed Media, Michael also wrote for AOL's BloggingStocks for three years, focusing most of his attention on the energy and technology sectors.