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Defining the Mass Affluent for Wealth Managers

Defining the Mass Affluent for Wealth Managers

Summary

There is a common perception that mass affluent individuals can simply be identified through income and asset levels. Our analysis challenges this perception and asserts that a range of parameters can and should be identified according to the institution’s business strategy, a clearly defined target client, the institution’s ability to serve, and the assessed profitability of the approach.

Synopsis

  • Take a step back and consider the mass affluent consumer as a whole.
  • Consider aspects of their lifestyle, consumption, and needs you can engage with in order to start a relationship and offer a service or product.
Reasons To Buy
  • How do I define who the mass affluent are?
  • Can I provide a proposition that is attractive to this segment?
  • Can I make money from serving mass affluent consumers?
  • How do I build my proposition over the longer term to meet the needs of the mass affluent?
Key Highlights

We recommend a balanced scorecard approach to provide a measure of the attributes, ability to serve, and profitability of a segment. Any preliminary segmentation can subsequently be adjusted such that it better fits your business vision or profitability objectives.

Through profiling the characteristics of this segment, this approach will enable each provider to understand the needs of this group and therefore build a proposition to serve them.


  • Executive Summary
    • The mass affluent are a diverse group and a one-size-fits-all approach is not appropriate
    • Critical success factors
  • Introduction
    • Criteria for defining a profitable client base can be as broad or specific as is appropriate to each provider
    • Providers need to be clear about their propositions
    • Provision of products and services will be fragmented, and best in class providers will emerge
  • A Balanced Scorecard Approach is Needed to Match Clients to Proposition and Profitability
    • Be clear about your business vison
    • Define the target customer
    • Assess the ability to serve client needs
    • Determine the profitability of required products and services
    • Review vision, client attributes, ability to serve, and profitability regularly
    • Be open-minded but realistic on definition and identification criteria used
    • Each criteria set, scale, and importance weighting will look different for each provider
    • With all criteria, a number of thresholds should be considered
  • Traditional Criteria Remain Valuable
    • Asset level is a key criteria used to define the mass affluent
      • Liquid assets are tangible and could be immediately advised on or invested
      • Profits may not be immediate despite high asset levels
      • Profitability can be lifted by using lower cost channels to serve
      • Thresholds must be set where consumer needs start to change
      • Country/regional variations are necessary to account for different population dynamics
      • Ascertaining asset levels is not straightforward for all providers
    • Income is commonly used for segmenting clients
      • Regular income has the benefit of stability and longevity
      • However, career breaks and years out are common
      • Income data can be used to understand and predict future mass affluent clients
      • Expenditure is as important as income
      • Income data must be contextualized in relation to demographics
      • Ascertaining income is easiest for banks and employers
  • Non-Traditional Criteria Will Help Develop a Range of Tailored Propositions
    • Mortgage type, value, and payment history can give insights into affluence and future liquid asset pools
      • Mortgage thresholds will be set based on assumptions and understanding of other aspects of individuals' financial situation
      • Property ownership and the use of mortgages is not widespread and so will not be relevant in all regions
      • Using mortgage details will prove more straightforward to banking providers
      • Consumer behavior will differ according to the market conditions
    • Home insurance - buildings
      • Building insurance values and relationship to mortgage value can be used to assess a customer's worth and potential
      • Analysis of building rebuild costs in relation to location can help insurers rank customers by property market value
    • Home insurance - contents
      • The nature of the contents covered under a home contents policy can provide clues about lifestyle and other needs
      • Thresholds used will vary according to the core product being insured or the rate at which cover value increases
      • Determining an accurate level of cover is often challenging for insurers
    • Credit card spend can give an indication of available liquid assets
      • Spend breakdown can inform providers of assets and personal interests
      • Criteria and thresholds used will need to apply to a broader definition set in order to be meaningful
      • Regional variations in card spend will need to be accounted for
      • It isn't just card providers that could benefit from card spend data
    • Facebook location and status analysis can capture displays of affluence and spending preferences
    • Risk appetite will be more relevant to investment managers
    • Frequent flyer points reflect mobility and a certain set of needs
    • Lifestyle and life stage characteristics also play a role in defining your potential client base
      • Nearly and newly retired
      • Entrepreneurs/business owners
      • Expats
      • Traditional old generation savers
      • Inheritors
  • Appendix
    • Abbreviations and acronyms
    • Bibliography
    • Further reading

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