Our industry doesn’t give a damn about the mass affluent.
You know, those hard-working, middle-class Americans who have “just” a few hundred thousand saved.
As financial advisers build their books, just about everyone tells them that the way to be successful is to work with wealthier clients. Rather than developing a business model that can serve the smaller clients, advisers simply increase their minimums.
There are even industry consultants who teach advisers how to “shed” smaller accounts.
Is that because the larger clients need more financial advice? Nope. It’s because the larger clients provide more revenue.
Where does that leave the single mom who worked hard and was able to save $300,000 in her retirement account? Or the couple who retire with $750,000 in their individual retirement accounts but little else?
Unfortunately, these people often are sold high-commission financial products and, all too often, wind up in terrible financial shape.
Just this week a friend reached out and asked me to review his mother’s “investment portfolio.” His 85-year-old mother had a modest home that was paid for and she once had about $150,000 in financial assets. But four years back, some salesperson masquerading as a “financial adviser” had her take $80,000 and purchase a single-premium life insurance policy and then had her take another $50,000 and throw it in a deferred annuity.
It’s easy for fee-based, fiduciary advisers to talk about how wrong it is to take advantage of a retiree with modest savings, but where are the advisers willing to really serve these people? If my friend’s mother had five million bucks, there’d be a line of quality advisers outside her door. But if she doesn’t meet the account minimum? That’s too damn bad for her.
Twenty-five years ago, as our firm took off, we made the decision to continue to serve smaller accounts. We not only launched our weekly, call-in financial topic radio program, we organized our model so we could serve both high-net-worth individuals and those in the middle.
True, 90% of the callers to our show have a financial emergency and will probably never be in the position to become clients, and, just as true, those smaller accounts we continue to serve are not terribly profitable, but we’ve structured our organization, as well as our offerings, in a manner that enables us to provide quality, fee-based advice to those who are neglected most by the industry.
When I look back at my career, those people I feel I’ve helped the most are not the ones with $20 million. The people I’ve had the greatest impact on are those with modest assets — where good planning resulted in a much higher quality of life.
Today, we serve over 12,000 clients. Many of these folks have millions with us, but the majority are under the $1 million mark. While other top advisers may scoff at the fact that we continue to serve the mass affluent, we know we’ve helped a lot of people.
Scott Hanson is co-founder of formerly Hanson McClain Advisors, a fee-based RIA with $8 billion in AUM.