Abstract
Boston, MA. - March, 17, 2009 -As the economy enters its second year in
an official recession, Emerging Affluent, like all Americans, are affected by
home foreclosures reaching an all-time high, the economy shedding 2.6 million
jobs in 2008 and home values continuing their precipitous declines. Even if
Emerging Affluent are guardedly optimistic about continuing in their own jobs,
their retirement portfolios have been hammered in a stock market performing at
Great Depression levels.
A new report from Mercator Advisory Group' s Retail Banking Practice Emerging
Affluent Households:Uncertainty Creates New Opportunities for Bank Advisors
offers an in depth examination of the challenges and opportunities found in
targeting Emerging Affluent households. With incomes of more than $100,000
and/or investable assets between $100,000 and $1 million (more than 24 million
households), this consumer segment is being underserved by banks, while
enthusiastically being served by brokers.
It is Mercator Advisory Group' s position that banks can win the investable
assets of these households, but they must leverage their technologies to lower
incremental transactional servicing costs; reexamine their own wealth
management compensation structures that push brokers to focus exclusively on
the Truly Affluent; and they must seek out new products and new marketing
messages to successfully obtain customers who have felt rebuffed by banks in
the past.
"While everyone in financial services (be they banks, brokerages, financial
planners, wealth advisors, mutual fund providers or insurance companies) has
been hungry for the assets and debts of the truly affluent, it has been
difficult for banks to leverage their human capital resources and technology
budgets to target, service and profit from the Emerging Affluent," comments
Elizabeth Rowe, Group Director of Mercator Advisory Group' s Banking Advisory
Services and author of the report. "The banking community continues to be
significantly challenged in marketing to the Emerging Affluent' s two key and
quite large demographic cohorts: Younger Baby Boomers and Generation X."
For institutions willing to try new strategies, Rowe states that the Emerging
Affluent can be pried from their brokerage relationships and brought into the
bank with: savings-focused credit cards, Certificates of Deposit Account
Registry Service, low-fee annuities and continually updated news on Federal
and state tax programs.
Report Highlights Include:
This is a critically important time/opportunity for banks/credit unions
marketing to the Emerging Affluent. The segment has been hammered by the
disappearing act played by their 401(k) s and their declining home values.
They need help now. In 2009 and 2010, $400 billion will shift from consumer
spending to savings. Banks must promote innovative core deposit products that
are attractive to Emerging Affluent customers new to actively saving. New
payment instruments combine the new inclination to save with the old
inclination to accrue rewards. The Fidelity Retirement Rewards AmEx card and
the Schwab Bank Invest First Visa credit card both offer 2% cash back with
that bonus going directly into investments/savings. Many Emerging Affluent
households will benefit from initiatives in the Federal government' s new
stimulus package. As details of these programs are known, banks/credit unions
need to actively outline and explain how these will affect their customers.
Technology investments bring the power of one-to-few communications to the
Emerging Affluent and also help banks sidestep some of their internal silo
issues. While client ownership must belong to a bank officer or branch or
product line, the ancillary turf wars erupting over services rendered and
value-added can be avoided.
Companies Mentioned in This Report:
American Express, Bank of America, Charles Schwab, Fidelity Investments, HSBC,
Merrill Lynch, Promontory Interfinancial Network, Regions Bank, T. Rowe Price,
Visa, Wells Fargo
This report contains 35 pages and 16 exhibits.
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