Data & Analytics

05:17 PM
Karin Halperin
Karin Halperin
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A recent survey shows financial institutions are overlooking the money management needs of customers with assets between $50,000 and $500,000.

Despite burgeoning competition from a host of traditional and nontraditional rivals, financial institutions have overlooked an obvious market opportunity--the tens of millions of "emerging wealth" customers with assets between $50,000 and $500,000, according to a recent survey commissioned by DirectAdvice, a Hartford, Conn., financial adviser.

Although 90% of the 91 senior executives surveyed at the country's leading financial institutions said Internet-based financial services, especially financial planning and advice, were important to their current and future marketing strategies, there was no guarantee that customers would look to them for these services. Loyalty to traditional institutions has foundered, and nontraditional providers have grabbed market share, they said.

About 80% of the respondents viewed emerging wealth customers as much less committed to traditional retail financial advice organizations than they were five years ago, with 82% agreeing that these customers are "confused" about where to go for financial planning and advice.

A majority said the accounts that customers hold today with financial service organizations tend toward transaction based instead of the higher-margin relationship based services.

In spite of ground gained by nontraditional providers and foundering loyalty, 66% of retail financial service executives agreed that emerging wealth customers still view banks, insurance companies and brokerage houses in their traditional roles, even as traditional providers concede they no longer have the financial planning and advice market to themselves. More than 77% agreed that competition has increased from Internet portals and other nontraditional financial services.

Almost 70% found that it has become harder to add perceivable value, and to differentiate their retail financial products and services from the competition's. And 98% agreed that financial planning and advisory services allow retail financial service organizations to compete more effectively, while 97% consider financial planning and advice services an important marketing and relationship-building tool that can help retail financial service organizations attract new customers and their assets.

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