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By
M. Isi Eromosele
Wealth
management firms have traditionally targeted the ultra high net worth (UHNW)
and high net worth (HNW) customer segments. This is because these segments
collectively represent almost fourteen times the financial opportunity of the
next largest customer segment on a yearly basis.
A
thorough analysis of the remaining population on a lifetime basis rather than
an annual basis yields two new customer segments with promising revenue
opportunity: the affluent and young affluent. These groups represent
significant returns for the right wealth management firm and offer the
opportunity for firms to take their offerings down market with the help of new
technologies.
The Affluent And Young Affluent
The
needs of the affluent customer segment are not overly complex. The advisory
relationship is essential to the affluent, as is a comprehensive wealth
management offering that empowers the customer.
Clients
in the Affluent segment are rapidly approaching retirement age, and deem
retirement and estate planning to be critical components of their personal
financial strategy; they are concerned about living their postretirement lives
in comfort and offering their children and grandchildren a measure of financial
security. Perception and personal touch are key with this group, as the
affluent require reassurance and have a lower affinity for technology than
younger segments.
For
the young affluent, asset management is critical. Their primary goal is to grow
the wealth they have. This group typically spends significantly, so cash and
credit management is key. Integrated information, multi-channel access and
competent advice are absolutely necessary to serve this segment.
The
young affluent are technically savvy and confident; for them, the advisory relationship plays an enabling role, rather
than one of direction. Young affluent customers want to be able to access
services and view aggregated account data to manage their assets in a
convenient and timely manner.
Wealth
management firms now have an increasing opportunity to use technology to take
their offerings down market. Technology represents one of the most effective
ways to reduce the costs associated with offering competencies by enabling advisors
to improve efficiencies and increase the number of clients per advisor.
Technology
can also reduce costs by increasing the effectiveness and rate of adoption for
self-service options, although this shouldn’t be considered a primary benefit.
As firms perfect providing wealth management services at the reduced costs that
new technologies enable, they can move even further down market and tap into
the remaining segments in the mass affluent.
Wealth
management firms should realize that the current numbers of prospective
customers who are technically adept will only increase as the new decade
progresses.
Additionally,
as the young affluent inherit wealth from older generations and slowly
matriculate to the affluent and HNW customer segments, they will take with them
expectations of integrated information, multi-channel availability and realtime
access to aggregated data and high service levels as they form their
perceptions about which firms are best capable of handling their business.
The
next generation of young affluent will take their place, possibly with
technical knowledge and performance expectations that don’t yet exist.
Identifying
attractive customer segments is just the first step in outlining a viable
wealth management strategy. Individual firms’ capabilities and constraints must
now be added to the mix. Only by matching the needs of target segments against
its own capabilities can a firm find a successful role in the wealth management
space.
M. Isi Eromosele is the President |
Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance
Copyright Control © 2012 Oseme Group
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