Meeting The Needs Of Mass Affluent Clients

How Mass Affluent Clients Differ From High Net Worth Clients, How To Serve Mass Affluent Needs And The Role Insurance Plays
Chad Druvenga, CEO, CBS Brokerage
Chad Druvenga, CEO, CBS Brokerage

Traditionally, it has been easier for financial advisors to serve high net worth clients with greater levels of sophistication, but technological improvements have raised the level of communication and customization available for mass affluent clients, as well as the range and sophistication of products available. As a result, the mass affluent market is becoming increasingly accessible at scale for advisors.

For advisors who wish to explore the mass affluent market in more depth, we spoke with Chad Druvenga, CEO of CBS Brokerage, an insurance brokerage that provides advanced planning for businesses, estates and planned giving, as well as life and disability insurance, annuities and long-term care coverage.

Druvenga explains differences between high net worth and mass affluent clientele, how to meet the needs of the mass affluent and the role insurance products play.

WSR: How can RIAs effectively adapt their service offerings to align with the unique needs of mass affluent clients?

Druvenga: Mass affluent investors present a growth opportunity for RIAs. Forward-looking RIAs craft client experiences encompassing a range of interconnected ancillary services, addressing clients’ needs to assure the highest probability of success. For mass affluent clients, this involves a focused approach to Social Security planning, mitigating longevity risks and managing long-term care expenses. Insurance products can effectively tackle these challenges if they are aligned with the client’s requirements, seamlessly integrated into the advisor-client relationship and retain adaptability at scale.

Successful firms in this space provide financial planning first and investment management second.

Mass affluent clients need comprehensive service just as much as their wealthier counterparts, albeit with differing characteristics and delivery methods. Meeting this demand at scale is no easy feat, but firms equipped with a diverse array of offerings, including insurance and annuity solutions when appropriate, stand poised to capitalize on a substantial growth market instead of allowing it to slip away. Successful firms in this space provide financial planning first and investment management second rather than investment management first with planning as an afterthought.

WSR: How should RIAs targeting the mass affluent incorporate longevity planning and healthcare cost management into their practice?

Druvenga: Targeting the mass affluent demographic at scale involves gathering all necessary information, dedicating time to maintain and develop financial plans, and educating clients on their financial risks and potential solutions. It is essential to create multiple scenarios to enlighten clients about their risks and available remedies.

For example, both clients and advisors must understand how major market downturns, rising living costs, premature death in the near future, and extended long-term care expenses could impact the success of the financial plan. Assessing the probability of success in these scenarios becomes crucial.

Furthermore, incorporating income annuities or long-term care insurance adds another layer to this analysis. These steps are essential for showcasing the value of protection products. By illustrating scenarios with and without these products, it eliminates biases in financial planning. Clients and advisors can then objectively evaluate the consequences of financial risks. At this juncture, it becomes a math equation, with decisions being made based on the plan’s overall health.

WSR: How do the ancillary tools or strategies a firm may implement for mass affluent clients differ from those who target high net worth clients?

Druvenga: For ultra-high and high net worth clients, risk management extends beyond wealth preservation to include minimizing tax liabilities, shielding assets from legal and regulatory risks, and facilitating seamless intergenerational wealth transfer. Alongside personalized insurance solutions, RIAs serving this demographic must also invest in estate planning, trust administration and tax optimization to remain competitive within the industry.

Serving the mass affluent involves addressing simpler financial objectives such as retirement planning, education funding and wealth accumulation strategies.

Conversely, serving the mass affluent involves addressing simpler financial objectives such as retirement planning, education funding and wealth accumulation strategies. While these clients have amassed significant assets, they may not necessitate the same level of complexity and specialization in financial planning and investment management.

RIAs catering to this segment often prioritize scalable, cost-effective solutions, utilize technology and provide educational resources to empower clients in making informed financial decisions. Additionally, integrating insurance solutions like long-term care and income annuities are critical to further enhance their financial security.

Michael Madden, Contributing Editor and Research Analyst at Wealth Solutions Report, can be reached at mmadden@wealthsolutionsreport.com.

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