A few weeks ago, the U.S. Federal Reserve published an update of the long-running Survey of Consumer Finances, and one of the topline findings shows that just over 12% of American families now have a net worth exceeding $1 million.
According to the survey, these new millionaires generally earn between $150,000 and $250,000 a year — an income that is significant but also substantially below that of many established financial advisors' typical clients.
Nevertheless, responding to a call for comments by ThinkAdvisor, a group of financial planning professionals associated with the XY Planning Network said they see these "mini-millionaires" as a highly attractive client group, even if they don't represent the most lucrative potential clients now.
One such advisor to contact ThinkAdvisor was Ryan Johnson, founder and financial planner at Hundred Financial Planning, a registered investment advisor shop set to open at the beginning of 2024. Johnson said his firm is being developed specifically to target this client group, and he offered an explanation of his thinking during a recent interview.
Johnson says his new firm will work best for households that earn at least $150,000 a year but also will have no asset minimums, "so even if they are not in the more-than-mass affluent stage or their dollars are tied up in employer-sponsored plans, they can get the financial guidance they need right now by paying a fee.
"Fast forward five or 10 years, they will have a strong relationship with a planner to help guide them through potential newfound wealth, whether due to business success or inheritance," Johnson predicts.
THINKADVISOR: Can you tell us a little bit about your background in the advisory industry? How did you come to decide to break away and found Hundred Financial Planning?
Ryan Johnson: Yes, I've been in the financial advisor space for about two years now. I'm a career changer, having started out in the advertising and marketing industry.
A few years ago, I was thinking and talking about the idea of changing my career, and my wife pointed out my interest in financial services and how I loved to talk about this stuff with friends and family. It just clicked, and I realized that she was on to something.
Right off the bat, I considered starting my own company. I had gotten exposed to the XY Planning Network folks, and one of them told me, "Hey, you already have a vision for how you want to do things. Why not go for it and launch your own firm?"
Also, another key background fact is that my father was a financial advisor here in Michigan, and I got to hear a lot of his conversations with clients while I was growing up, so I feel like I had a vision of how to do this.
But, to me, it felt like a better choice to first join another established firm so I could get my feet under me. That's what I did, and I started first as a relationship manager and then moved up to become an advisor pretty quickly.
The firm I am preparing to leave, like many firms, has a target market that is primarily those pre-retirees and affluent people in their late 50s and early 60s. That makes sense, because these people need a lot of guidance and there is a good living to be made in giving them objective advice.
But what I've seen in the past two years is that I really like working with those folks in their 30s and 40s — people who are more in my generation, but they might not be hitting the firm's asset minimums.
One exciting thing that has happened in my time here is that, after I joined, the firm created a monthly payment option in order to serve less affluent clients, and that really sparked my interest as a basis for building my own firm.
