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Rising to the Challenge of the Rising Mass Affluent


The desire for growth is leading bankers to renew their focus on capturing the mass affluent population. In the U.S., these are the people with liquid investable assets ranging from $250,000 to $1 million, representing more than $7.5 trillion in assets. But for most banks, making inroads with the mass affluent population has proven difficult. The reality is that while mass affluent clients tend to use retail banks for transaction accounts and CDs, they go to brokerage firms to manage their investable assets. Typical penetration of retail bank wealth management services among mass affluent clients, according to Booz & Company analysis, averages a paltry 5% to 7%. 

But there is a subsegment of the mass affluent where banks might have an underappreciated advantage. Our study conducted in March 2013 suggests banks should target the investable assets of the “rising mass affluent” (RMA), or those between 30 and 49 years old. These individuals are more likely to be looking for a closer relationship with one bank – and a wider range of services from that institution – than older mass affluent customers.

Why the Mass Affluent Matter

Retail banks have been under tremendous profitability pressure over the last five years. The mass market segment, historically a core driver of revenue, is marginally profitable at best. Meanwhile, the high-net-worth (HNW) segment, defined as those with investable assets of $1 million to $30 million, though profitable, is too small to drive enough growth and revenue. This is why many banks are pinning their hopes on the mass affluent to provide growth opportunities.

Mass affluent customers are typically six to 10 times more profitable than mass market customers. They also generate 60% to 70% of total customer profits for retail banks even though they make up only 20% to 30% of banks’ customer base. Mass affluent customers use retail banks primarily for low-margin, low-growth transaction and saving relationships. To capture a greater share of wallet, banks need to grow into helping the mass affluent with their higher margin investments.

But the competition for mass affluent business is increasing, particularly from wealth management firms and broker-dealers. Survey results show that national and regional banks tend to provide the mass affluent cohort primarily with transaction accounts, while full-service brokers, discount brokers, independent brokers, and mutual fund companies manage their investments. If banks could get closer to the industry best practice of 15% to 20% of penetration among bank clients, they could deepen their wealth relationships, see a lift in deposit balances, increase their loan products among mass affluent clients, and significantly boost revenue.

Some banks have recently tried to target the mass affluent with investment products, with varying levels of success. One of the attractions KeyBank saw in its 2012 acquisition of HSBC retail branches in New York was HSBC’s mass affluent offering. In March 2013, PNC rolled out an investment and retirement planning center in Mt. Lebanon, Pa.—the first of many meant to serve the mass affluent specifically. Fifth Third has a preferred banking program to try to sway its mass affluent bank customers to bring over their investment portfolios by using advantages such as waived ATM fees and credit card rewards.

Overall, banks have a serious perception problem to overcome. According to our study, mass affluent customers look outside their primary banks for their investment needs because they don’t believe the banks are capable of providing the products and services their households need. In fact, 44% of the mass affluent surveyed did not even consider their primary bank as a potential provider of household investment services. Of those who did consider it, many ultimately did not choose the bank either because they did not feel it had the products or solutions to meet their needs (34%) or because they did not see it as a qualified provider of investment products or advice (30%).

Meet the Rising Mass Affluent

The rising mass affluent (RMA) group – Generation X, that grew up in the prosperous 1980s – has different preferences and priorities than the older mass affluent demographic and makes for an excellent target.

The RMA began their careers during a time when the Internet was creating new wealth-generating opportunities around the world, but they have still experienced enough economic turmoil to strongly value financial preparedness in lean times. Many of them plan to work beyond the retirement age of their predecessors, giving them a longer investment horizon for creating wealth. Sitting between the less-experienced and less-educated millennials and the older and more well-off baby boomers, the RMA are also more frugal, more self-reliant, and more likely to save than other mass affluent consumers.

What’s key is that they are significantly more likely to consider using their primary bank for investing: 51% say they would consider it, compared to only 37% of those over the age of 50, making the RMA a target group that’s more likely to be won over by banks. As younger investors, the RMA have the greatest appetite for guidance, and their top three financial priorities are saving for retirement (79%), protecting current assets (72%) and growing household wealth (70%). They need to begin preparing for the near- and long-term future, and they know it.

The rising mass affluent are in a phase of life that makes them particularly attractive to banks. They need some investment guidance, but not intensive support from investment professionals. They are concerned about protecting assets and growing wealth, paying off their primary mortgage, and saving for other goals like education and parental care. This requires complex planning that in turn requires a financial advisor and members of gen X understand the importance of this. More than half of the RMA respondents say it’s important to have access to a dedicated financial advisor to meet their investment needs, yet 59% of them do not have a financial advisor, which presents a clear opportunity for banks. Equally important, the RMA are young with plenty of time for their assets to grow. If banks can make inroads with this group today and manage investments for the long term, they can prosper as they help the RMA graduate to higher levels of wealth.

Though each individual bank will have a different approach to targeting the rising mass affluent, any financial-services provider looking to win them over should:

  • Get on their investment radar. Establish a unique value proposition and supportive marketing to target RMA investment needs and preferences.
  • Give them exactly what they need. Create offerings that reflect the RMA’s diverse needs and their desire for financial guidance.
  • Give them a personalized, well-trained team and build a strong relationship. Cater to the RMA’s preference for building lasting relationships by offering a personal banker–financial advisor team.
  • Use analytics to understand them better than anyone else does and to offer them what others can’t. Collect and analyze the necessary data to offer the RMA customized products and services that stand out from more general, “one-size-fits-all” mass affluent offerings.
  • Integrate services into mobile and Web for a seamless, convenient experience. Sixty-one percent of the RMA we surveyed said integrated personal wealth management available through online and mobile channels was a top priority. Integrating all channels (branches, online, and mobile devices) supports the growth of both banking and investment relationships.
  • Reorganize around the customer. Because their investment needs are diverse, the products and services the RMA need straddle all the traditional banking channels such as retail, wealth, and business banking. Banks need to reframe their thinking and reorganize in a way that’s more customer-centric in order to break out of the silos.

Mr. Hyde is a senior partner, global leader of the financial services practice, Mr. Jain a partner and Ms. Lyman  an Australia-based principal at New York City-based Booz and Company. They can be reached at [email protected]; [email protected] and [email protected] respectively.