GlobalData Plc

The mass affluent opportunity for private banks

As private banks respond to the ever-changing demands of clients, they will do well to focus on resonating with mass affluent audiences.

At the Private Banking Conference: London 2017 event, speakers from the financial services industry discussed key issues that wealth managers and family offices are facing, such as the growing presence of digital platforms and capabilities across the banking landscape. Despite the event having a focus on private banking clients, there was interestingly much talk about the mass affluent segment. This comes as no surprise given that the private banking market is saturated, with HNW individuals often working with multiple wealth managers to grow their investments.

Furthermore, mass affluent audiences are receptive to digital platforms for overseeing their finances and carrying out investment decisions. To generate business and capture a larger share of the market, private banks are exploring opportunities to resonate with this segment.

Mass affluent investors are an attractive audience: not only do they represent a large segment of the population, both in population and wealth, but they are also future HNW investors. Data from our Wealth Markets Analytics shows that the world’s mass affluent population reached 299.5 million in 2016, with 54.26% of the world’s total liquid assets held by this segment. While these HENRYs (high earners not rich yet) and HENRIETTAs of the world have not yet accumulated significant wealth, they earn enough money to pique the interest of competitors.

So how should private banks and wealth managers reach out to this audience? The answer comes with offering a hybrid solution comprised of human and digital capabilities. When it comes to their portfolio, clients value frictionless experiences. These individuals are accustomed to technology and appreciate the features it affords. Private banks and wealth managers can leverage technology to support features that contribute to this experience, such as automation, immediacy, and flexibility. For example, UBS SmartWealth provides clients with digital access to their investments and financial goals, while relying on while humans to rebalance portfolios and recommend risk levels.

At the same time, wealth managers and private bankers will be wise to remember that there are some features that can only be supplied by humans themselves. In fact, wealth managers recognize the benefits of investing in automated services: the majority of providers we surveyed agree that they can complement an existing offering. The ability to have tailored and targeted conversations with an expert, along with collaboration, are features that reinforce that competitors will do well to keep the human element in the equation.

Looking ahead, private banks will do well to resonate with mass affluent audiences. As the world’s mass affluent population continues to grow, these investors will become an even greater opportunity for private banks to retain and increase market share. This, coupled with the demand by mass affluent investors for digital services, reinforces the urgency by private banks to adapt their business model to resonate with the preferences of these individuals. It can be expected that as the private banking world focuses on the mass affluent as their target audience, so too will greater attention be placed on digital capabilities.

By Nicole Douglas, Wealth Management Analyst

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