Mass affluent market: Your ideal pool of prospects?

The high-net-worth market is tough to break into, extremely competitive and requires an almost concierge level of service. The middle market is vast and underserved, but it's hard for many independent producers to generate enough income from this market to make it worthwhile.

So what's the best market to target for the typical independent producer who hasn't cracked the HNW code and is frustrated with the apathy of the middle market? For an increasing number of independent producers, it's the mass affluent market.

The mass affluent market is a marketing term used to refer to the high end of the mass market or the low end of the HNW market. Just how affluent this market is depends on who's measuring it. Some say it refers to individuals or households with $100,000 to $1 million in liquid financial assets, while others peg it at $500,000 to $2 million.

While this demographic — especially if you top it out at $1 million of investable assets — falls below the minimum wealth threshold required by many HNW-focused advisors, it is an attractive sweet spot for advisors who don't cater to the HNW or ultra HNW clients.

In the first-quarter issue of "The Cerulli Edge, Managed Accounts Edition," a report found investors with less than $500,000 in investable assets remain largely underserved by advisors.

"These investors are not the priority of practices targeting the higher wealth tiers, but they represent a largely untapped and profitable market for the vast majority of advisors," the report stated.

While the fish that make up the HNW market are undoubtedly lucrative, they are also contained by a small pond with many experienced fishermen lining the shores. The mass affluent market inhabits a much bigger pond, allowing the fishermen to spread out.

In 2012, the IRS, using 2007 data, estimated 1.8 million Americans had a net worth of at least $2 million — putting them into the HNW demographic. It is estimated there are roughly 33 million mass affluent households in the United States, and they own roughly 37 percent of America's liquid financial assets. Roughly 30 percent of American households could be described as mass affluent. That's a pretty big pond.

The mass affluent have money to spend. Wikipedia describes the demographic this way:

"The mass affluent have been characterized as those who save more than they spend and invest for their future. While they worry about funding their children's college education, they realize other savings and loan options exist and they are not opposed to their children paying some part of their educational costs. The mass affluent generally may worry about replacing their paycheck in retirement, and may need to be encouraged to spend more money during their retirement years. They often wish to leave an inheritance to their children. The mass affluent will have between $500,000 and $1.5 million (USD) in investable assets upon retirement with a net worth between $500,000 and $2.5 million (USD). They spend between $4,000 and $10,000 (USD) per month in retirement."

Sounds like a pretty good pool of prospects to me. I'm going to be looking deeper into this demographic in the coming weeks and plan to offer some more comprehensive coverage. Perhaps you'll be taking a closer look at this market as well.

For more from Brian Anderson, see:

Wired people: Coming soon to an insurer near you?

Middle-income America isn't ready for fee-based advice

Lobbyists: Don't forget about the fiduciary standard