The 4 best wealth management client segmentation niches

The 4 best wealth management client segmentation niches

For years, most financial advisors have rightly focused on the traditionally wealthier groups of customers. A range of attractive investor segments are now emerging. With it, the target audience is changing and is more diverse than ever.

With the increase in specific customer requirements and competition in the industry, some financial professionals benefit from implementing segment-based strategies. These advisors are providing the soundest financial advice and best customer service. By establishing better relationships, they build client loyalty.

To benefit from effective segmentation, however, firms must choose the right target markets. With older generations phasing out, here are the main investor target groups that show signs of significant and sustainable growth.

Women and wealth

One of the most neglected, yet profitable segments in the investment field today is women. Nearly 86% of asset managers admit that they primarily target men, according to a Bank of New York study.

This is a huge mistake that is costing firms billions in lost revenue. Women represent an increasingly important segment, with strong growth and significant investor success. Indeed, as more and more young, affluent women are becoming financially literate, they are moving into the wealth management space.

A 2021 study by Investissement Québec found that 32% of Quebec companies that received an investment between 2016 and 2020 were owned or managed by women. That is why attracting and retaining female clients will be critical to the growth of wealth management firms moving forward.

To succeed, advisors need to discover what makes female investors tick. This includes their needs, preferences, and behaviors when it comes to managing their money. This is done through discussions, but you should also keep and organize your notes on your findings.

This cannot be done without a portfolio management solution that includes a customer relationship management (CRM) system. This helps to collect and manage data about your actual and potential customer relationships and interactions, as well as their portfolios.

Generation Z wealth

Gen Z is an important segment not to be ignored, especially given the number of individuals this group represents. They currently number 6.7 million in Canada, and they will surpass baby boomers by 2032, according to Statistics Canada.

Also noteworthy is that Gen Z is poised to become one of the most important investors segments. Unlike previous generations, they stand to inherit record amounts of money. ISS Market Intelligence estimates that 840 billion CAD in financial wealth will be inherited by them by 2030. This represents a lot of investment power.

Gen Zers are already far from being neophytes, with over half of adults already investing most notably in the stock market. Though they are not clear on exactly how investing works, according to Investopedia Financial Literacy Survey.

Firms that want to attract younger generations must adapt their marketing strategy, by creating campaigns on social networks, for example. They must also provide tailored guidance and sound investment advice, along with products and solutions that align with their core values. This includes focusing on things such as Tech and ESG assets.

Some FinTech tools help wealth professionals to generate focused marketing information and create tailored communications. Better targeted services and communications promote better client relationships and drive user adoption.

Hybrid high-net-worth investors

Ultra-high-net-worth and high-net-worth individuals have long been one of the most profitable client segments. They offer one of the most impressive potential returns on investment for advisors that choose to focus on these segments.

However, hybrid-high-net-worth investors are a great opportunity for advisors to stand out from the crowd. These investors have significant amounts of assets under management both in self-directed accounts and through traditional advisors.

Investors in this category have plenty of disposable income. McKinsey & Company reported that hybrid-high-net-worth investors have household annual incomes of more than $250,000. Yet they have less than $2 million in total invested assets. This is a niche market not to be overlooked by banks and asset management companies seeking to develop and expand.

Full-service direct brokerage firms and traditional wealth management firms are in the best position to take advantage of this situation. They must develop focused investment strategies while prioritizing growth and adopting an innovative mindset. They must be prepared to adapt to the changing environment, including migrating to digital platforms and WealthTech solutions.

Committed first-time investors

There have been tremendous changes in the finance industry since the pandemic, and this extends to the investment world. Indeed, we have seen a resurgence of so-called committed first-time investors. These investors are fully engaged as active traders via direct investment accounts.

In 2020, more than 2.3 million gross new Do-It-Yourself (DIY) accounts were opened, according to Investor Economics, a financial services research firm. The bulk of these were committed first-time investors.

This important niche of asset owners promises to generate significant revenue for investment management firms that choose to focus on them. But they must tailor their service model to the wants and needs of this segment. These include targeted growth strategies, speedy transactions, streaming quotes, a range of real-time features, and efficient technology enhancements.

5 steps how to segment clients

To realize the full benefits of market segmentation, financial institutions should be equipped with the right tools. Ideally, they need an all-in-one, powerful, and customizable portfolio management solution. The best tool should have the ability to load historical data and a strong computational capability. This solution should be able to integrate with a customer relationship management (CRM) system.

Companies should then conduct a customer segmentation analysis following these five steps:

  1. Design your segmentation project
  2. Identify the type of customer data you want to collect
  3. Collect your data
  4. Analyze and rate the types of customer segments
  5. Present and incorporate feedback

To learn more about these steps, read the blog 5 steps to investor segmentation to grow your client base.


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