Magazine article American Banker

Emerging Affluent: 1 Size Doesn't Fit All

Magazine article American Banker

Emerging Affluent: 1 Size Doesn't Fit All

Article excerpt

A quick and expensive way to target the emerging affluent would be to slap down a yuppie label on certain households and mail them mass-produced marketing literature.

But a former Fed researcher is telling investment managers to move past stereotypes, look at what prospects actually need, and develop more products to pitch to them.

"We've tended to use very generic products with crude distribution," said Frederick O. Yohn, vice president of Conning & Co., an asset management research firm based in Hartford, Conn., and that has led to blunt marketing messages.

"You have to figure out what they'll respond to before you walk in the door," Mr. Yohn said. "Actually, you have to figure that out before you mail them something."

To get started on his recently released study, "High Net Worth Market for Financial Services," Mr. Yohn combed the Federal Reserve's 1995 Survey of Consumer Finances - published by his former employer - along with the Commerce Department's Current Population Surveys.

He quickly decided that demographic factors such as age, income, and address could not be relied upon to signal investment habits. So Mr. Yohn focused instead on spending behavior and perceived needs.

Across the board, he found that net worth had nothing to do with how people invest. Mr. Yohn said upwardly mobile middle-class people - the most coveted group of prospects besides the wealthy - are especially hard to pin down.

Pigeonholing the so-called emerging affluent could lead to poor marketing that costs more than potential fee income, Mr. Yohn warned. And other experts agreed.

"The emerging affluent has subsets - it's hard to say what they want," said Michael P. Kostoff, managing director of Advisory Board, a Washington- based private banking consultant firm.

Mr. Kostoff said emerging affluent people can range from a well-paid but high-spending baby boomer who still needs credit to an executive close to retirement who is on the verge of cashing in corporate stock options. …

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