Why Middle-Income Folks Need Advisors

Registered investment advisors frequently focus on affluent clients or those that are close to meeting that standard. For example, it’s common for practices to set minimum assets thresholds for new clients, some of which can be as high as $100,000, $250,000 and beyond.

That makes sense, particularly for practices operating on the fee-based model. Get enough clients in the door that bring $500,000 or $1 million to the table and even at an annual fee of 1% of those assets really add up and can boost the top and bottom lines. With that, it’s not surprising that many practices gloss over middle-income prospects.

There’s nothing wrong with advisors making money. That’s the point of business, but often times, prospects in middle income tiers are the ones that most need high-quality financial advice and are the ones that most benefit from it.

For advisors looking to grow their asset bases while working with clients that genuinely need the expertise and have the potential to bring more assets to the table later in life, folks in mid-income ranges make a lot of sense and now could be the ideal time to engage these prospects.

The Middle Merits Attention

Advisors should examine the findings in a new Santander survey. The Spanish bank, which has operations here in the U.S., polled 2,200 middle income Americans in September. The survey confirms that this group is ripe of elevated financial advice.

For example, middle income folks are definitely aware that interest rates and nearly 70% want to access FDIC-backed cash instruments to earn better yields on their cash. However, 22% of those polled by Santander know what yield they’re currently earnings on savings accounts. Just 53% know what a certificate of deposit is and just a third know what a money market is. Overall, just 41% of those polled are knowledgeable about savings accounts.

Lack of knowledge in any financial topic is negative for other reasons. In the aforementioned cases, middle income Americans queried by Santander aren’t taking advantage of today’s elevated interest rates and letting their cash do more work for them.

Believe it or not, 35% of those polled by the bank fit into one of the three following camps. They didn’t know interest rates had soared, they don’t know how to access high-yield savings accounts or they don’t want to be bothered to do so. Each of those points confirms there’s a plethora of potential clients out there that could benefit from hiring an advisor.

More Reasons the Middle Needs Advisors

Obviously, CDs and money markets aren’t “sexy” as far as financial products go, but advisors can leverage conversation about those instruments to ready clients for more useful fare, such as dividend stocks or even higher-yielding corners of the bond market. After all, a time will eventually come when interest rates decline.

It’s also worth noting that that just 35% of those polled by Santander consider themselves savers. That sounds ominous, but the survey also indicates many folks in middle income brackets would be willing to dial back on indulgences such as dining out or entertainment if it meant bolstering savings.

Point is, there’s a treasure trove of prospects out there with some money and a clear need for financial advice. Advisors may want to consider seizing the opportunity.

Related: There’s Still Hope for ESG, Sustainable Investing