Mass-Affluent Online Customer Needs in a Retirement Age

Boston, MA - 11 July 2007

Only 5% of Mass Affluent investors who use online brokerage receive their primary investment advice from financial advisors, which is about half of what mass-retail and high-net-worth consumers indicate.

A new Impact Note from Aite Group, LLC examines specific demographic data, and the needs and wants of retail brokerage customers.

In March, 2007, Aite Group published a report titled "What Really Matters to Retail Consumers of Online Brokerage? Who They are and What They Value". Based on the findings of that report, there was strong interest to drill deeper into the data for specifics by retail investor segment: High-Net-Worth (US$1M - US$10M in investable assets), Mass-Affluent (US$100KM - US$1M in investable assets), and Mass-Retail (US$100K and less in investable assets). The mass-affluent demographic receives particular emphasis, as a number of firms have instituted targeted efforts at reaching that consumer group, including the recent merger announcement between Wachovia and AG Edwards.

The large and lucrative mass-affluent market is appealing to retail brokerages, but their primary offerings may not directly target that population. In general, brokerages emphasize relationships with financial advisors to be a core competency; however, only 5% of the mass-affluent market rely on financial advisors for their primary investment advice when they are active users of online brokerage tools. Instead, they are likely to value robust online stock and fund screening tools and online research.

"While brokerage firms move the customer sweet spot from high-net-worth investors to a more-target-rich market of mass-affluent investors, many would do well to note this is not a single bucket of individuals," says Adam Honoré, senior analyst at Aite Group and author of the note. "Those in the demographic who leverage online capabilities are demanding customers. They are younger than their high-net-worth peers and much more self-help oriented in their investing style. For that reason, firms ignoring their online capabilities in favor of pretty statements and branches in the best markets may find themselves playing catch-up to the firms who continue to innovate their online offering."

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