Financial Challenges and Needs of the Mass Affluent Client

According to a recent survey, there are roughly 32.3 million mass affluent individuals in the United States. These people contribute to 26% of the 123 million U.S. households. Mass affluent individuals are often confused with high-net-worth individuals, but they’re not the same. The mass affluent community is considered a part of the middle class but with a higher income earned per year. The community has ample funds and means to lead a comfortable life but, at the same time, also requires diligent financial planning to ensure that their high income is saved and invested appropriately.

An average mass affluent client can have several distinct financial goals, plans, needs, and wants. They also have financial hardships and hiccups unique to their income group. A financial advisor can help mass affluent individuals with these financial challenges and requirements.

Let’s find out more about some of the financial needs of mass affluent clients.

Who are mass affluent clients? 

A mass affluent individual has liquid assets valued between $100,000 and $1 million. This excludes real estate, cars, etc. They have an annual household income of $75,000 or more annually and primarily include white-collar professionals.

In most cases, mass affluent clients are well-educated people with post-graduate degrees and a sound understanding of basic financial planning and wealth management.Some data also indicates that almost 40% of mass affluent people are baby boomers.

The mass affluent are sometimes confused with the upper middle class. But these are two different income groups. The former category considers people on the basis of their income and liquid assets, and the latter only considers their income.

7 common challenges mass affluent clients face

The mass affluent client segment represents a growing market in the financial industry. As more and more people earn, grow, and accumulate wealth, they will also seek financial advice. These clients can present unique challenges and needs compared to other segments as they have a higher income than others but also need to actively make this income work for them by investing it. They cannot be relaxed or spendthrift like the high-net-worth individuals who can afford luxury goods, cars, and travels. But they also do not need to be as frugal as the income groups below them.

Mass affluent clients may have complex financial situations that require sophisticated financial planning. Additionally, they may have more specific needs, such as estate planning or tax optimization, requiring specialized expertise. Thus, hiring professional mass affluent wealth management professionals becomes essential.

Here are some common challenges faced by the mass affluent community:

1. They may have complex financial situations, making it challenging to manage their money

Mass affluent clients often have complex financial situations, as they have multiple sources of income, investments, and assets. They have their primary income from their business or job. They also have considerable money invested in different assets, such as workplace 401(k) retirement accounts, Individual Retirement Accounts (IRAs), mutual funds, stocks, bonds, cryptocurrencies, and more. Many of these individuals can also have real estate assets and earn rental income from them. Managing their money can be challenging and require sophisticated financial planning strategies and specialized expertise.

They need to determine the best investment options based on their age, income, and future goals, and it can help to hire professional, mass affluent financial services. Financial advisors can help these clients determine their desired asset allocation strategy, choose the right percentage of each investment group, and optimally balance their risk and reward ratio. Sophisticated financial planning can help these clients invest as per their goals and ensure a future as financially secure as their present.

2. They need help to plan their taxes and lower their tax liabilities

With a high income comes the liability of paying high taxes. The U.S. follows a progressive tax system, which means that tax rates increase as the taxpayer’s income increases. Some common tax planning issues for mass affluent clients include high tax liabilities, complex tax laws, and changing tax regulations. Tax optimization strategies such as investing in tax-efficient investments can help.

A financial advisor can be the ideal person to ensure these individuals do not lose unnecessary money to tax. For instance, financial advisors can recommend investments like the 401(k) and IRA for tax-advantaged growth. They can also recommend municipal bonds, which are tax-exempt at the federal level. Some other tax-friendly investment options include Indexed Universal Life (IUL) insurance, Health Savings Accounts (HSAs), and 529 College Savings Plans. These accounts can offer tax benefits, and a financial advisor can help clients select the ones based on their requirements.

Apart from investment advice, financial advisors can also recommend selling underperforming assets to offset capital gains and reduce tax liabilities. This is known as tax loss harvesting and is a great strategy to lower taxes. Financial advisors may further recommend gifting strategies to reduce clients’ taxable estates and take advantage of the annual gift tax exclusion. Charitable endeavors, such as donating assets instead of cash, can also help reduce tax liabilities.

3. They may find it challenging to plan their estates

Some common estate planning issues for mass affluent clients include minimizing estate taxes, protecting assets from creditors, avoiding probate, and ensuring that their assets are distributed according to their wishes. Financial advisors may recommend clients establish wills and trusts to ensure their assets are distributed according to their wishes along with minimizing estate taxes. They can ensure that clients nominate and update their rightful heirs for all their assets to eliminate the probability of the estate going through probate. In addition, mass affluent financial services can also help employ asset protection strategies, such as placing assets in irrevocable trusts or Limited Liability Companies (LLCs), to protect assets from creditors.

Mass affluent clients with businesses can find it hard to plan their business succession, and a financial advisor can help develop suitable business succession planning strategies, such as establishing a buy-sell agreement, finding a replacement to lead the company internally, etc., to ensure that a client’s business is transferred according to their wishes without unwanted hassles and losses.

Life insurance is also a critical part of estate planning. The right financial advisor can help clients purchase suitable life insurance policies to provide liquidity for estate taxes, cover the immediate financial expenses of dependents, and ensure that their beneficiaries are well provided for in their absence.

4. They may have specific retirement goals and may require customized retirement planning solutions

Retirement planning is a complex and challenging task for many individuals. But it can be especially tough for mass affluent clients as they have significant assets but may not have access to the same level of financial planning expertise as high-net-worth clients. Financial advisors can help clients fix their retirement savings rate, increase it periodically, review spending habits to identify areas to cut back, and consider working longer to generate additional income to address insufficient savings. Financial advisors can further mitigate the risk of poor investment returns by asking clients to diversify their portfolios, adjust their investment strategy to match their risk tolerance and financial goals, and rebalance their portfolios regularly. This can help the client build a suitable retirement nest egg that can suffice them for life.

Healthcare costs are a major expense in retirement, and financial advisors can address these concerns by recommending long-term care insurance, reviewing Medicare coverage options, and factoring healthcare costs into retirement planning accounts, such as HSA. Further, financial advisors can also help mass affluent clients minimize the impact of higher tax rates with tax-efficient withdrawal strategies from Social Security benefits, 401(k), IRA, etc., in retirement.


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5. They may have a high net worth and require risk management strategies to protect their assets

Financial advisors can help mass affluent clients develop a comprehensive risk management plan that addresses their unique financial situation, risk tolerance, and goals to protect their assets and achieve their financial objectives. The term risk management refers to the process of identifying, assessing, and mitigating risks to achieve a client’s financial goals. Mass affluent clients with significant assets to protect may face various risks, such as market volatility, income loss, longevity risk, cyber security threats, and other liabilities. To address these risks, a financial advisor may recommend clients diversify their portfolio, review their insurance coverage, consider asset protection trusts and limited liability companies, and purchase disability insurance. Financial advisors may also recommend clients some low-risk, assured income options, such as annuities, bonds, etc., along with high-risk ones, like stocks, to balance out the risk.

Additionally, they can review the client’s retirement plans regularly and implement growth strategies to address longevity risk. People in high-income groups can also be prone to cyber security threats. Educating the client can help to eliminate the possibilities of these. Liability risks are also common among mass affluent clients and can be addressed through accidental insurance coverage, umbrella liability insurance, and asset protection strategies.

6. They may need assistance with family wealth management to ensure their future generations benefit from their wealth

Mass affluent clients may have unique lifestyles and legacy goals that require specialized planning. Financial advisors may recommend clients develop a comprehensive financial plan that addresses their lifestyle and legacy goals, establish a trust to protect assets, and consider strategies such as life insurance or long-term care insurance to support their lifestyle goals. For instance, a financial advisor can also help clients establish 529 college savings plans to ensure that their children and grandchildren have access to quality education.

Mass affluent clients may want to transfer their wealth to future generations, but this process can be complex and require professional expertise. A financial advisor can help with the systematic distribution of the client’s wealth among their beneficiaries while keeping in mind taxes and other legal procedures.

7. They may expect personalized service and customized solutions from their financial advisors

Since mass affluent clients have complex financial issues and concerns, they can require personalized attention and tailored solutions. They expect a high level of service from their financial advisors, including regular communication and proactive advice. Mass affluent clients can have unique financial goals, such as philanthropy, estate planning, or business succession planning, that require specialized expertise.

Financial advisors must have a deep understanding of their financial situation, goals, and risk tolerance to meet the needs of mass affluent clients. They must be able to provide customized solutions that address their unique needs and help them achieve their financial objectives. This may involve developing a comprehensive financial plan, reviewing investment strategies, recommending tax-efficient strategies, and providing guidance on wealth transfer and philanthropy.

In addition, mass affluent clients expect regular communication from their financial advisors, including updates on their portfolio performance, market trends, and any changes in their financial situation. They also expect proactive advice on how to optimize their financial strategies and take advantage of new opportunities. Financial advisors can build strong relationships with their mass affluent clients and help them achieve their long-term financial goals by providing personalized service and customized solutions.

To conclude

Understanding and solving the financial challenges and needs of the mass affluent client is crucial for financial institutions to serve this growing market effectively. The mass affluent client faces a unique set of financial challenges that require the right expertise and tailored solutions from financial advisors. Financial advisors can help build strong relationships with their mass affluent clients, help them achieve their long-term financial objectives, and position themselves as trusted professionals in an increasingly competitive marketplace.

Use the free advisor match service to find mass affluent wealth management services in your area. All you have to do is answer a few simple questions based on your financial needs, and the match tool will help connect you with 1-3 advisors best suited to meet your financial requirements.

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