If you've ever played baseball, tennis or another racquet sport, you've no doubt felt the "sweet spot" — that part of the bat or racquet where you can most powerfully and accurately hit the ball. When you hit the sweet spot it not only feels good, but the ball just "sings."
There's also a sweet spot in the affluent marketplace. It consists of clients who are generally underserved, but whose ample wealth can readily anchor an up-market consultative practice. By becoming familiar with how these affluent individuals and families view themselves, and with what they want and need, you can learn how to best serve them and develop a profitable business.
If nothing else, the very existence of this large sweet spot should finally put to rest the ongoing debate over whether there are enough affluent clients for "everyone" to move up-market. In truth, the amount of affluence in the United States is staggering, and for those willing to concentrate their marketing efforts and design their value proposition to capture a portion of it, there is simply no shortage of affluent clients. So, don't wait to focus your practice and raise your minimums; the sweet spot is already out there — you just have to make up your mind now to connect with it.
Sweet Talking Statistics
According to the Capgemini/Merrill Lynch World Wealth Report, the number of Americans with investable assets of at least $1 million grew from 2 million in 2002 to nearly 2.3 million in 2003, and then to 2.5 million in 2004. Such rapid yearly growth is expected to continue for the foreseeable future. A 2005 study by CEG Worldwide principal Russ Alan Prince and David A. Geracioti surveyed 1,417 affluent individuals. Of these, 34.1 percent had $500,000 to $1 million of investable assets, 46.5 percent had $1 million to $2 million, and 19.4 percent had $2 million to $6 million.
What do we know about these individuals? First, they are baby boomers. Almost half — 44.5 percent — are between 55 and 65 years old, while 31 percent are under 55 and 24.5 percent are 65 or older. Second, as the first chart below shows, their source of wealth is quite surprising. When I give talks, most advisors guess that most of this wealth comes from inheritances or the sale of privately held businesses. But in fact, the great majority of this wealth is generated by individuals who have jobs and save their money. Thus, as you approach those in the sweet spot, remember that for the most part they are "ordinary" individuals who have simply worked hard and saved effectively.
Sweet and Approachable
Not only are these "ordinary" individuals in terms of how their wealth was generated, but their view of themselves is quite different than you might have expected. As the chart below shows, 57.4 percent of the individuals surveyed consider themselves to be upper-middle class, and 42.6 percent consider themselves to be simply middle class. None of these individuals — not even those with up to $6 million of investable assets — considered themselves to be upper class or wealthy. Not one!
It's uncertain why these individuals do not consider themselves to be wealthy. It may be that they compare themselves to the world's richest people as listed in Forbes; next to multi-billionaires like Bill Gates or Warren Buffett, maybe everyone else really is just middle class. Or it may be that America, ultimately, is a non-elitist society, and since many of these sweet spot individuals worked hard to earn their wealth, they simply view it as improper to think of themselves as being affluent.
Sweetly Serving the Middle-Class Millionaire
