How to profitably serve mass affluent clients

It takes efficient systems, technology and people to make this approach work

I’ve proudly built a highly profitable financial advisory firm serving the mass affluent.

Two weeks ago, I wrote about why it’s a mistake for advisers to ignore this segment. But it takes efficient systems, technology and people to make it work.

For some background, my partner and I started our firm 27 years ago by targeting retirees from the telecommunications industry. At the time, telephone companies were going through a massive restructuring and offering many of their workers lump-sum pension buyouts and early retirements.

Learn some factors should you consider before taking a pension buyout here.

We began working with the hourly employees, but as we became experts with their pension plans, we began getting referrals to senior managers and executives. Obviously, upper management had more assets to work with, and it would have been easy for us to change course and simply target them. In fact, an industry consultant implored us to do just that.

Instead, we put together a framework where we could serve the executives while still helping the rank and file.

That framework helped create what we are today: A full-service wealth management firm that guides the financial and investment lives of 12,000 high-net-worth and mass affluent clients.

Here’s what we do to provide high-level service to the mass affluent:

Standardized financial planning. We’ve developed a financial planning process that deals with the major issues without taking hours to construct. Typically, these plans are not terribly complex and can be completed by a junior adviser at the firm. (This approach works quite well for most of these clients.)

Model portfolios. While our firm provides some customization for larger clients, for smaller clients we use model portfolios. Rather than leaving the investment decisions up to the financial adviser, our investment committee has several models from which our advisers can choose. The portfolios are managed by the firm and the adviser doesn’t have to worry about monitoring the accounts. (Some might say our portfolio management approach is like what you’d find with a TAMP.)

Minimum planning fees. We believe that the greatest values we can provide as advisers are, first, comprehensive financial planning and, second, behavioral finance (keeping clients from making mistakes from which they cannot recover). The investment management is a commodity. As such, we charge a minimum annual fee for someone to become a client, rather than require that they have a minimum account balance (something we recently rolled out).

Telephonic or video reviews. Rather than having these clients come into the office on a regular basis, they are encouraged to meet with us either over the phone or via video. These meetings take much less time than in-person meetings.

We’ve found many ancillary benefits from serving mass affluent clients in addition to high-net-worth ones. For example, working on the planning team for mass affluent clients is a great training platform for the new college grads we hire each year. There are also, of course, lots of new client referrals. And lastly, our associates take great pride in the fact that we serve normal people, like themselves, and not just the 1%.

If you’ve ignored the mass affluent as you’ve moved higher up the net worth ladder, I believe you’re not only missing a great opportunity for your business, you’re missing out on serving others and helping the people who need it most.

[More: You’d better increase your service offerings, or else find partners who can help]

Scott Hanson is co-founder of Allworth Financial, formerly Hanson McClain Advisors, a fee-based RIA with $8 billion in AUM.