Competition for Wealth Management Customers Increasing

At a time when retail banks are finding it difficult to achieve pre-recession levels of growth and profitability, the competition for wealth management business has never been more intense. But while increased marketing and significant monetary incentives are being used to lure customers, recent research indicates that organizational barriers remain that could hamper growth. 

A just published Retirement Plans Trend Report conducted by the direct and digital monitoring firm Competiscan found that retirement rollover direct mail, electronic media and digital communication volumes increased during the second half of 2012 as did the value of offers used to entice customers. While many of these offers came from investment firms, more marketing was done by traditional banking organizations than in the past. 

In 2012, Bank of America was one of the most aggressive wealth management marketers, cross-selling the services of their brokerage unit, Merrill Lynch to current higher value bank customers and prospects.

Bank of America/Merrill Lynch Cross-Sell Mailing (December 2012)

The Mass Affluent: An Elusive Bank Target

While targeted by every bank, mass affluent households are difficult for bank marketers to reach. They have a distinct lifestyle from the rest of the nation in terms of media consumption, technology use, financial attitudes and preferences for financial products and services.
 


Representing a sweet spot between the mass market and affluent segment, the mass affluent segment is not homogeneous, but a diverse array of micro segments that differ from each other. To reach this group, new products and services need to be developed, new messaging needs to be used and varied channels need to be leveraged.


Three recent studies help to shed light on the opportunities and challenges presented by this highly sought after segment.

According to Nielsen, the mass affluent segment consists of more than 13 million households and represents approximately 11 percent of all U.S. households. The segment is defined as having income producing assets between $250,000 and $1M (excluding real estate) and an average household income of $105,000 in 2011. This income is more than 50 percent higher than the national average household income of $62,912. In depth analysis also shows a high correlation between income and assets for targeting purposes.

What Banking Needs to Become

In this quarter's Strategy + Business Magazine, Vanessa Wallace and Andrew Herrick discuss the significant changes in the banking industry over the past few years and how bank's business models, capabilities and practices must change as well. In their very good article, they emphasize that the purpose of banking and the needs of the customer have remained relatively consistent with regards to safe havens for savings and consistent access to credit for investment.

The environment has changed, however, with the competitive landscape changing, the regulations increasing and the public trust eroding. In addition, the times of high growth have ended.