According to the latest Global Wealth Databook by Crédit Suisse, the mass affluent segment (comprising individuals having US$100,000 to US$1 million of investable assets), which represents about 361 million people globally, owns 42.3 % of global wealth, more than the 41% owned by HNIs (people with investable assets of US$1 million to US$30 million). Europe has the highest number of mass affluent individuals (143 million), followed by APAC (90 million), North America (86 million), Latin America (12 million) and Africa (3 million).

For banks and wealth managers the mass affluent segment is more profitable than the traditional banking mass market. A significant proportion of the HNI and UHNI customers has already been tapped but the number of mass affluent customers is growing at a much faster rate than that of HNIs. These and other statistics available in the public domain clearly indicate that the mass affluent segment represents a lucrative and untapped business opportunity for banks and wealth managers.

Have the banks been successful in tapping this segment so far? If not, why?
While the opportunity is out there, are the banks ready to serve the mass affluent segment? I would say, not yet! The mass affluent segment has actually been the Achilles’ heel for banks; tapping the segment has not been easy for them. Typical penetration of retail bank wealth management services among mass affluent customers averages less than 10% as per an analysis done by Booz & Company in 2012. While the mass affluent clients bank with retail banks for transaction accounts and deposits, they go to brokerage firms to manage their investable assets or seek advice. All this brings us to the big question – What should the banks do to serve the mass affluent segment effectively and generate more business at the same time?
We did a dip-stick survey to understand the needs of the mass affluent customers. How do they like to transact with the banks? What do they expect? Firstly, a large number of the mass affluent are tech-savvy, prefer self-service and would like to have a banker on call when they need it. They use tablets and smart phones, as staying connected to the world and continuous communication is important to them. Secondly, they are well informed and tend to have strong views about the economic and financial environment. So, when it comes to making investment decisions, although they have a tendency to seek money management advice from an expert, they like to call the final shots themselves. Thirdly, they have diverse investment goals for which they seek specialized products and services. The investment goals may range from lifestyle changes, major purchases, funding the education of their children to retirement planning. At the same time, capital protection is dearer to this segment and complex avenues such as art or privately owned businesses are much less preferred by this segment as compared to the HNIs. We also noticed that real estate is an investment avenue but this preference is more fragmented by geography.

What can banks do to make inroads into this segment and achieve growth?
Firstly, to offer exemplary customer experience, the banks should have a dynamic multichannel solution that offers integrated wealth management and brokerage capabilities over mobile and internet. A mix of self-service and on-demand assistance options, coupled with the right tools and dashboards, can address the inherent needs of mass affluent users. The users should be able to access research recommendations and product advertisements, view portfolio, originate and track orders, and download reports online.

Secondly, banks should offer on demand advice and assistance to mass affluent customers. In this model, the banks would not need to invest in appointing dedicated relationship managers, but can have a common pool of trained staff, including financial advisers, portfolio managers and risk / compliance officers, to service a set of mass affluent clients. Tools for on-demand assistance like Click-to-chat and Click-to-call would enable this model.

Finally, banks should develop a specialized menu of offerings, wealth plans and advices for a sub-segment of mass affluent customers – a menu that would provide a sense of exclusivity, upside benefits and a clear price versus benefit proposition. They should offer targeted financial plans that would help mass affluent customers progress towards becoming high net worth and investment advice for which the customers are willing to pay. It is also very important for the banks to optimize the return on investments in terms of risk, objectives and investment timeline of the mass affluent customers. Offerings may range from equities to pension funds suited to a customer’s age and risk appetite. However, banks can’t develop individual financial plans for each mass affluent client, due to the obvious cost and operational issues, and hence should offer pre-built products optimized for a particular sub-segment of mass affluent customers, with room for suitable changes.

In summary, the banks should strategically target and acquire more mass affluent customers and provide them exemplary customer experience and engage with them the way they like, and offer specialized products and services which would cater to their financial needs.