Emerging Affluent Investors Present Opportunity for Advisers

More than half (55%) of financial advisers intend to target emerging and mass affluent investors in the next five years, according to a Fidelity survey. These investors present attitudes and behaviors similar to today’s millionaires, despite differences in gender and race (two-thirds are female, and one-quarter are non-white).

“We’ve been pointing out for years how unique the next generation of investors is, but in reality they exhibit many similarities to today’s millionaires, even the deca-millionaires,” says Bob Oros, head of the registered investment adviser segment, Fidelity Clearing and Custody. “These similarities should motivate advisers to broaden their client base beyond the traditional millionaire and give all investors confidence in their ability to move up the wealth spectrum.”

The study identifies six wealth-building factors impacting the wealth potential of the emerging affluent, including:

1. Time horizon: A mere 1% of the emerging affluent is retired, while the average age of these investors is 40.
2. Career: Many are pursuing professions such as information technology, finance and accounting. While they may currently hold lower-level positions than millionaires, they have the opportunity to move up the ladder in the years ahead.
3. Income: The median annual household income for these investors is $125,000, two and a half times that of the median U.S. income. The median income for the emerging affluent is nearing the income of today’s millionaires: $200,000 for those still employed.
4. Self-made status: Like many millionaires and deca-millionaires, approximately eight in 10 emerging affluent investors have earned or increased their assets on their own.
5. Long-term focus: Three in four of these investors are focused on the long-term growth of their assets, and three in 10 are focused on supporting the lifestyle they want in retirement. Millionaires report the same statistics.
6. Investing style: The emerging affluent reveal a willingness to invest aggressively in an effort to maximize returns. They are also willing to set aside a significant portion of their portfolio for riskier investments with the promise of a bigger payoff. Both the emerging affluent and deca-millionaires were most likely to describe themselves as “self-directed” investors, seeking hands-on involvement with their investments.

“To be a ‘millionaire in the making,’ investors should get in the game early and have a plan that will enable them to achieve their goals,” explains John Sweeney, executive vice president, Fidelity Investments. “While some may be interested in managing their finances themselves, may others don’t have the skill, will, or time to strategically grow their wealth. The latter should consider getting help from a financial professional, so they don’t lose the gift of the time horizon that is on their side.”

The Millionaire Outlook study surveyed emerging affluent, millionaire, and deca-millionaire investors, assessing their ability to accumulate wealth. More information in the full report is available here.