For obvious reasons, wealth managers tend to focus on high net worth clients. But in the future, there may be more opportunity in pursuing a different kind of investor: the rich but not superrich.
New research shows that while the world's ultrawealthy population is shrinking, the moderately wealthy are growing. A
By the end of 2022, the study found, there were 2.5 times as many affluent individuals (53.8 million) as there were high net worth ones (21.7 million). Elias Ghanem, head of the Capgemini Research Institute for Financial Services, sees this as a "new frontier" for financial advisors.
"Wealth management providers need to look beyond their current high net worth base to expand their reach, and the affluent segment grew in number," Ghanem said. "And, by the way, they are becoming richer."
Capgemini's data bears this out. In 2022, the assets of the world's affluent grew to $27 trillion. Meanwhile, the wealth of the high-net-worth crowd declined by 3.6%, its steepest drop in a decade.
Why did the ultrarich decline? Capgemini blames the stock market of 2022, which hurt portfolios all over the world.
In the U.S., the S&P 500 finished the year
"The global economy experienced a steeper-than-expected slowdown," Ghanem said. "And when you have a heavily invested population … the equity portion of the portfolio takes the biggest hit."
Meanwhile, affluent investors offer a growing base of potential new clients for wealth managers. And that's not just because of their numbers — they're also highly interested in getting financial advice. Capgemini surveyed 3,203 "affluents" around the world and found that 71% of them would like to receive wealth management services from their banks.
And yet not all advisory firms seem to be jumping at the chance to recruit these clients. Thirty-four percent of the firms Capgemini spoke to said they were "not exploring this segment." The result is a lot of dissatisfied customers. Only 18% of affluent investors said they were happy with their current financial advisors.
Some wealth managers see this as a missed opportunity. Jack Heintzelman, a certified financial planner at
"They are being underserved," Heintzelman said. "These individuals are great clients because you can start the strategies earlier [with them] and really see the impact. They also are passionate and very curious to learn."
James Reardon, the chief financial officer of
"For our firm, this middle-of-the-road market has been our sweet spot for the past several years," Reardon said. "We find these clients to be eager to learn and appreciative of our comprehensive services. Our turnover is very low."
Read more:
So how can advisors bring in these clients? The best way to reach as many as possible, Capgemini believes, is through technology. Firms can either create digital versions of the services they already provide, connect clients to digital tools from a third party or build an entirely new platform of web services specifically for affluent investors.
If that sounds difficult, it's because it is.
"None of them is a simple magic wand," Ghanem said.
But in the long run, he said, it may be worth it. As the ultrawealthy population declines and the moderately wealthy rise up, it looks increasingly like the future is affluent.
"There is no way to live on the high net worth individuals because it's a highly concentrated population," Ghanem said. "Expanding the pool of potential wealth management clients is imperative to help drive long-term growth across the wealth management industry."
