Capturing the middle-class millionaire

With so much talk these days about pursuing the highest end of the high-net-worth market, there’s an attractive group of potential clients being largely overlooked: regular old millionaires.

We’ve surveyed more than 1,400 of them and based on our research, these investors — with $1 million to $10 million in net worth — don’t describe themselves as wealthy. Rather, they see themselves as solidly middle class or upper middle class.

As such, their value system is akin to that of the middle class: They are hard-working and seeking to accomplish more, they feel they give more than they get and they want help with keeping more of what they earn.

Moreover, their ranks keeps growing. Measured by net worth, the number of millionaire households in the U.S. increased by 1.1 million in 2017 (the most recent data available), according to Credit Suisse. That brought the number of millionaires in the U.S. to approximately 15.4 million.

That spells opportunity for advisors. But bear in mind, you won’t build much of a business with them if you’re not delivering a value-add experience. As with any segment, you need to go beyond investments to hit their hot button issues, which, in this case, include:

• Mitigating taxes. Remember, this group identifies as middle class, not rich—they want to find ways to keep more of their money in their wallets.
• Taking care of heirs.
• Safeguarding wealth from being taken unjustly.
• Having a positive impact on charities and valued causes.

Ask yourself how well you’re addressing these issues. We found that 82% of advisors think their clients have estate plans for transferring wealth to their heirs. Although it was reassuring to learn that 70% of the middle-class millionaires do have those plans, that gap still represents missed opportunities.

And let’s be honest: How up-to-date are those existing estate plans likely to be, especially given recent changes in estate tax laws? Chances are, they’re not relevant anymore. What a great opportunity to start a conversation with these millionaires.

Likewise, consider asset protection to safeguard wealth. While more than half of advisors think most of their clients are taken care of in terms of asset protection, we found that a mere 13% of middle-class millionaires have asset protection plans.

Talk about an area of financial planning where people “don’t know what they don’t know.” This is a massive opening to start conversations that show clients and prospective clients how you can help them mitigate big risks they don’t even realize they face.

Delivering great value to middle-class millionaires will go a long way to addressing a big problem that advisors serving these investors face: a lack of loyalty.

Consider this: 79% of advisors say their clients are loyal to them. But among those clients with $1 million to $2 million in investable assets, just 9.5% said they felt loyal to their primary advisor.

Clearly, advisors don’t have their clients’ devotion to the extent they think they do. That presents both a risk — losing clients you think will stick with out — as well as the opportunity to attract other advisors’ clients who have wandering eyes. Of course, you’ve got to instill a sense of loyalty in those new clients!

Clients who self-identified as loyal gave their financial advisors an average of $376,000 in new assets over a 12-month period — versus just $23,000 on average from clients who said they were “satisfied” with their advisors.

So what fosters loyalty? There are six key drivers that advisors must possess and demonstrate consistently if they want to tap into the middle-class millionaire client opportunity:

1. Character. Character entails the personal qualities clients want in their financial professionals. The three most important of these qualities are integrity, trust and dependability.
2. Chemistry. Chemistry is the ability to be in synch with clients. You have chemistry when you “connect” with them. You know what your clients like to talk about and you see eye to eye with them on important issues.
3. Caring. Caring is about empathy and truly knowing what is most important to your clients, and not just their financial goals and objectives. However, these alone are not nearly enough. You must communicate that you really do have a good grasp on their world.
4. Competence. The more you can demonstrate and communicate your competence, the more loyal your clients become. A strong sign that your clients consider you to be competent is when they believe that you are recognized as a leading expert by your peers.
5. Consultative approach. Being truly consultative is the most decisive factor in creating loyal clients, regardless of business model. There are three central components.
6. Cost-effective model. This is not about cost, but value. Most wealthy clients are willing to pay for high-quality financial solutions. Moreover, they are usually willing to pay for products and services when they see the value. Clients focus on costs when their financial professionals fail to focus on value. They want their financial professionals to deliver cost-effective solutions.

Conclusion: Investors who have “just” a few million dollars represent serious opportunities for many advisors — if you know how to get their attention, deliver real value that they’re willing to pay for and cultivate their loyalty. Show them that you can tackle the issues they care about beyond their investments — and demonstrate the traits that generate a sense of loyalty in them — and you can find yourself with an extremely successful practice that taps into a market that too many advisors are overlooking these days.