Wealth advisors at Wall Street firms are failing to focus on clients with more than $500,000 but less than $2.5 million – an emerging afflue...

Wealth advisors at Wall Street firms are failing to focus on clients with more than $500,000 but less than $2.5 million – an emerging affluent group which has been accordingly dubbed “the leftovers”. People with less than $2.5 million make up 10 per cent of households in the US looking to invest, according to Boston-based research firm, Cerulli Associates. The amount of money they already have is more than $8 billion in total, almost twice what they had in 1989. The so-called "leftovers" often succumb to advisors who are reaching up from businesses that cater to lower wealth tiers or playing down from firms that court those even richer. The Cerulli Associates report, entitled “Navigating the Emerging Wealth Marketplace” also points out, that a personalised service is not available for people without several million dollars to tempt an advisor. “In general, lower-net-worth individuals prefer a more anonymous service model. On the other end of the wealth spectrum, high-net-worth individuals are more human-oriented. These individuals have a large amount of assets and potentially complex needs, which are easier to address via human contact, though more and more they do want information available to them via the Internet,” said the report. The emerging affluent fall somewhere in between these two groups in the wealth spectrum. They require a service model that is a combination of the two. However, Wall Street firms are not equipped to handle a group of people who want product and service, not just one or the other. For example, those who may need only resources devoted to retirement, retirement income and wealth transfer or business owners seeking a variety of services may end up shortchanged. "Some Wall Street firms have a policy whereby investors with less than $100,000 get dumped to an online account, serviced by a call centre,” Cerulli stated. Where an emerging affluent client will have just one administrative person helping to provide a service, most high-net-worth advisors would have a support staff of at least three. The report concludes that $5 million is the magic number when it comes to getting proper wealth management. When the client has over that figure they can expect to receive family-office-like treatment, where they get estate planning, trusts services and preferred investor status. “These are the kind of investors who were made privy to shares of hot Internet IPOs of the 1990s. Meanwhile, the rest of us suffice with ‘commoditised service’," said Cerulli Associates. High net worth advisors maintain the largest percentage of clients over the age of 45 at 82 per cent. Emerging affluent advisors rank second at 74 per cent and lower-net-worth advisers rank third with 67 per cent, said the report.