America's Affluent: Understanding the Evolving Needs of the Emerging Mass Market 2000–01 Affluent MacroMonitor Report


Executive Summary
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Executive Summary

In the past decade, financial institutions have faced the challenges of the information technology revolution, a changing regulatory environment, and intense competition from companies within and outside the financial industry. The creation of new wealth and the subsequent increase in the number of Affluent households bring to the fore a new challenge: how to adapt to the changing profile of the Affluent customer.

The prolonged economic expansion of the 1980s and 1990s and the largest adult demographic segment's—the Boomers'—reaching its peak income-earning years have set off a significant increase in the number of Affluent Americans. The expansion of the Affluent market brings with it enormous opportunities for financial institutions. But along with it come the challenges of dealing with a more complex market. The new Affluent customers come in various shapes and sizes: different demographics, different life stages, and different financial personalities. Some Affluent customers are increasingly sophisticated and self-directed; others need personalized relationships and trust; still others appreciate some handholding.

This 200001 MacroMonitor Affluent analysis volume provides a unique perspective on the financials, personalities, capabilities, and mind-sets of the 16.9 million U.S. households that qualify as Affluent. By providing key indicators of financial needs and attitudinal and demographic data, this report may be used as a guideline by financial marketers so that they can identify and serve the different Affluent segments profitably.

The first section focuses on the emergence of the Mass Affluent, the bulk of the new Affluent market, consisting of Affluent households with less than $1 million in net worth. It provides a demographic profile of these households and discusses their financial needs on the basis of their life stages. More important, we cross-referenced our MacroMonitor data with SRI Consulting Business Intelligence's (now Strategic Business Insights') VALS™ consumer psychographic segmentation system to complete the Mass Affluent profile. We therefore provide financial marketers with a more comprehensive view of this important market by defining the customers, their financial needs, and how to market to these customers on the basis of their consumer buying behavior.

How financial attitudes of Affluents may have changed, or not changed, and which Affluent segments have been most affected by the stock market's downward slide are the focuses of the second section. Affluents as a whole remained unperturbed by the "transitory" bursting of the stock market bubble. But the attitudes of certain segments—those whose wealth is heavily concentrated in financial assets relative to their real estate assets and the young emerging Affluent with limited past exposure to a bear market—have dramatically shifted, revealing a decline in their financial self-confidence. Although the more sophisticated and experienced do-it-yourself segment remains self-confident and will continue to be in control of its financial affairs, the volatility of the markets has indeed opened an opportunity for financial institutions to expand and emphasize their advisory services among certain Affluent segments.

The final sections of the report provide trend data for the Affluent market as a whole and discuss in detail the six Affluent segments on the basis of the CFD segmentation algorithm. Incorporating demographic, psychographic, life-stage, and behavioral variables to select, cluster, and assess household behavior, these segment profiles provide financial marketers with additional perspectives on how to meet the needs of this new and evolving Affluent market.



TABLE OF CONTENTS
Executive Summary 1
Targeting the Mass Affluent 3
  Who the Mass Affluent Are 5
  Financial Needs of the Mass Affluent 5
    Transactions 6
    Credit 7
    Protection 8
    Savings and Investments 9
  How to Market to the Mass Affluent 12
The Affluents' Response to a Market Downturn 14
  Confidence in the Market 15
  Need for Advice 18
Searching for the Holy Grail: True Customer Relationship Management 20

Segment Profiles
Total Affluent 22
  Demographic Profile 22
  Balance Sheet 24
  Attitudinal Profile 26
Balanced Builders 29
  Highlights 29
  Demographic Profile 30
  Balance Sheet 32
  Attitudinal Profile 34
  Demographics 36
  Savings and Investments 37
  Credit 39
  Protection 39
  Transactions 40
  Information and Advice 40
  Personal-Computer and Internet Use 41
  Marketing Implications 42
Focused Builders 43
  Highlights 43
  Demographic Profile 44
  Balance Sheet 46
  Attitudinal Profile 48
  Demographics 51
  Savings and Investments 52
  Credit 54
  Protection 54
  Transactions 54
  Information and Advice 55
  Personal-Computer and Internet Use 56
  Marketing Implications 57
Real Asset Builders 58
  Highlights 58
  Demographic Profile 59
  Balance Sheet 61
  Attitudinal Profile 63
  Demographics 66
  Savings and Investments 68
  Credit 70
  Protection 71
  Transactions 72
  Information and Advice 72
  Personal-Computer and Internet Use 73
  Marketing Implications 74
Emerging Affluent 75
  Highlights 75
  Demographic Profile 76
  Balance Sheet 78
  Attitudinal Profile 80
  Demographics 82
  Savings and Investments 83
  Credit 85
  Protection 87
  Transactions 89
  Information and Advice 90
  Personal-Computer and Internet Use 92
  Marketing Implications 94
Wealthy Retired 95
  Highlights 95
  Demographic Profile 96
  Balance Sheet 98
  Attitudinal Profile 100
  Demographics 103
  Savings and Investments 105
  Credit 107
  Protection 108
  Transactions 108
  Information and Advice 109
  Personal-Computer and Internet Use 110
  Marketing Implications 112
Entrepreneurs 114
  Highlights 114
  Demographic Profile 115
  Balance Sheet 117
  Attitudinal Profile 119
  Demographics 121
  Savings and Investments 123
  Credit 125
  Protection 125
  Transactions 126
  Information and Advice 126
  Personal-Computer and Internet Use 127
  Marketing Implications 129

Tables
Some VALS™ Guidelines for Reaching the Mass Affluent 14
Real Asset Builders: Median Balance in Savings and Investment Products 69
Wealthy Retired: Estimated Mean Number of Annual Financial Transactions 109

Figures
Growing Affluent Market 1
Total Affluent: Mass Affluent versus High Net Worth 4
Distribution of Affluent Households, by Net Worth 4
Distribution of the Mass Affluent, by Age Cohort 5
Distribution of the Mass Affluent, by Life Stage 6
Mass Affluent: Use of Online Financial Transactions 7
Mass Affluent: Credit Incidences 8
Mass Affluent: Ownership of Life Insurance 9
Mass Affluent: Ownership of Savings and Investment Products 9
Mass Affluent: Goals for Saving and Investing 10
Mass Affluent: Most Important Goal for Saving and Investing 11
Mass Affluent: Ownership of Retirement Accounts 11
Mass Affluent, by VALS™ Segments 12
Nasdaq Composite Index, Daily Closes 15
Most Important Factor in Determining Placement of Savings and Investments 16
The Stock Market is too Risky for Me 17
I Feel Qualified to Make My Own Investment Decisions 19
I Do Not Need Advice about Investment Options 20
Total Affluent: Savings and Investment Orientation 26
Total Affluent: Behavior toward Financial Institutions and Delivery of Services 27
Total Affluent: Attitudes toward Professional Financial Advice 28
Balanced Builders: Savings and Investment Orientation 34
Balanced Builders: Behavior toward Financial Institutions and Delivery of Services 35
Balanced Builders: Attitudes toward Professional Financial Advice 35
Balanced Builders, by Age Cohort 36
Balanced Builders, by Life Stage 36
Balanced Builders: High Net Worth versus Mass Affluent 37
Balanced Builders: Ownership of Investment Products 38
Balanced Builders: Ownership of Retirement Products 38
Balanced Builders: Median Balance in Retirement Products 39
Balanced Builders: Reliance on Professional Financial Advisors 40
Balanced Builders: Online Financial Activities 41
Balanced Builders: Use of Home Banking and Home Investing 42
Focused Builders: Savings and Investment Orientation 48
Focused Builders: Behavior toward Financial Institutions and Delivery of Services 49
Focused Builders: Attitudes toward Professional Financial Advice 50
Focused Builders, by Age Cohort 51
Focused Builders, by Life Stage 51
Focused Builders: High Net Worth versus Mass Affluent 52
Focused Builders: Median Balance Held in Stocks and Mutual Funds 53
Focused Builders: Ownership of Stockbrokerage Accounts 55
Focused Builders: Approach toward Financial Decision Making 56
Focused Builders: Acceptance of Need for Financial Advice 56
Focused Builders: Use of Home Banking and Home Investing 57
Real Asset Builders: Savings and Investment Orientation 63
Real Asset Builders: Behavior toward Financial Institutions and Delivery of Services 64
Real Asset Builders: Attitudes toward Professional Financial Advice 65
Real Asset Builders, by Age Cohort 66
Real Asset Builders, by Life Stage 67
Distribution of Mass Affluent Households, by Segment 68
Real Asset Builders: Ownership of Savings and Investment Products 69
Real Asset Builders: Likelihood of Making Retirement Account Transactions 70
Real Asset Builders: Incidence of Liabilities 71
Real Asset Builders: Online Financial Activities 73
Real Asset Builders: Use of Home Banking and Home Investing 74
Emerging Affluent: Savings and Investment Orientation 80
Emerging Affluent: Behavior toward Financial Institutions and Delivery of Services 81
Emerging Affluent: Attitudes toward Professional Financial Advice 81
Emerging Affluent, by Age Cohort 82
Emerging Affluent, by Life Stage 83
Emerging Affluent: Ownership of Savings and Investment Products 84
Emerging Affluent: Ownership of Retirement Products 84
Emerging Affluent: Risk Orientation 85
Emerging Affluent: Method of Paying Monthly Credit-Card Bills 86
Emerging Affluent: Credit Attitudes 87
Emerging Affluent: Incidence of Mortgage and Credit Insurance 88
Emerging Affluent: Life Insurance Attitudes 89
Emerging Affluent: Difference from Total Affluents in Average Number of Financial Transactions 90
Emerging Affluent: Financial Advice Preferences 91
Emerging Affluent: Likelihood of Obtaining Professional Advice in the Next 12 Months 92
Emerging Affluent: Online Financial Activities Currently Use 93
Emerging Affluent: Use of Home Banking and Home Investing 94
Wealthy Retired: Savings and Investment Orientation 100
Wealthy Retired: Behavior toward Financial Institutions and Delivery of Services 101
Wealthy Retired: Attitudes toward Professional Financial Advice 102
Affluent Households with Female Head of Household Only, by Segment 103
Distribution of Affluent Female-Head-Only Households, by Segment 104
Wealthy Retired: High Net Worth versus Mass Affluent 105
Wealthy Retired: Risk Orientation 106
Wealthy Retired: Ownership of Financial Assets 107
Wealthy Retired: Use of Professional Financial Advisors 110
Wealthy Retired: Use of Home Banking and Home Investing 111
Wealthy Retired: Top Online Financial Activities Currently Use 112
Entrepreneurs: Savings and Investment Orientation 119
Entrepreneurs: Behavior toward Financial Institutions and Delivery of Services 120
Entrepreneurs: Attitudes toward Professional Financial Advice 120
Entrepreneurs, by Age Cohort 121
Entrepreneurs, by Life Stage 122
Entrepreneurs: High Net Worth versus Mass Affluent 122
Entrepreneurs: Primary Financial Decision Maker 123
Entrepreneurs: Ownership of Investment Products 124
Entrepreneurs: Participation in Traditional IRAs 125
Entrepreneurs: Use of Professional Financial Advisors 127
Entrepreneurs: Top Online Financial Activities 128
Entrepreneurs: Use of Home Banking and Home Investing 128

Boxes
Background 2
The CFD Affluent Segmentation 17

Appendixes
A. MacroMonitor Survey Methodology A-1
B. Survey Weighting Procedures B-1
C. Affluent Segment Definitions C-1