They might not have it now but soon will, and 401k providers (and advisors) should therefore tune in.
A segment of millennials is doing quite well, among a growing population dubbed HENRYs—High Earners, Not Rich Yet. Like their yuppie predecessors, they’ve got assets to invest, and retirement plan professionals risk losing them to robos if they ignore the opportunity.
“Banks and retirement plan providers have the benefit of incumbent relationships when addressing the HENRY segment, but they are squandering their chances to serve as long-term advice providers to the emerging wealth segment by not elevating their advice offerings to meet the demands of these participants,” Scott Smith, director of advice relationships at Cerulli Associates, a global research and consulting firm, explains.
However, providers that wish to serve HENRYs face a considerable challenge with creating a service model that is both scalable and valued by consumers, Smith adds.
Members of the HENRY cohort represent an emerging wealth opportunity with evolving advice needs, which offer providers the chance to capture both current assets and future flows.
“The first decision point that emerging investors face is what type of firm they will use as their primary financial services provider. Investors in the purest HENRY segment, with incomes in excess of $125,000 but investable assets of less than $250,000, indicate the highest reliance on both bank deposit and retirement plan providers compared with any other cohort.”
These channels are least likely to provide much in the way of personalized financial advice; thus, many bank programs struggle to retain these high-earning clients as they graduate into higher wealth and their appetite for personalized advice grows.
“The most important part of building market share within this segment is maintaining relationships as these investors accumulate assets,” Smith concludes. “Providers targeting HENRYs will need to take the long view and realize that the benefits of reaping what they sow will accumulate over years rather than quarters.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
