For wealth businesses to thrive into the future there is a group of Australians, the emerging affluent, that have great potential and cannot be ignored.
Unlike Baby Boomers, they are younger typically Gen Y individuals. They have higher-than-average incomes, household wealth that is growing, a solid understanding of financial concepts and a strong appetite for investing. With a population of around 1.5 million, they control about AU$2.2 trillion of household wealth.
The emerging affluents, like no other, are most likely to use financial advice today (39.9% use today) or most likely to take up advice soon (51.5%) - the majority of which plan to realistically start receiving advice in the next five years.
In this article, we rely on Netwealth’s latest research, The Advisable Australian, where over 1,000 Australians aged 30 years and over were surveyed on a range of personal, family and wealth related issues. We pay special attention to the digital needs of the emerging affluent – a digital native group that demand a technology-first client experience on par with the other digital services they consume from their wealth partners.
Emerging affluents are younger and more educated
According to the report, the emerging affluent are mainly generation Y (72.5% of them), with an average age of 37 years old. They are just as likely to be female (48.8%) as male (51.2%) and they typically live in in metropolitan areas (82.4%).
A defining feature of this group is that they are typically better educated than the rest of the Advisable Australian population with almost one in three (32.8%) having a postgrad degree and a further four in 10 (41.6%) having a graduate diploma.
Being more educated has resulted in more than half (52.4%) being in senior roles and management, with a large number already in executive positions, despite their younger age.
Education has also led to a greater appreciation of financial concepts, evidenced by emerging affluents saying they have a good or very good understanding of the relationship between risk and return (83.8% of them) and almost seven in 10 rate their understanding of different strategies to invest (e.g., asset allocation) as good or very good.
Emerging affluents are wealthier and have more financial goals and needs
Emerging affluents are typically wealthier than the average Advisable Australian. Their average household income is $202,124 p.a., with one in 10 earning over $350,000 p.a. They own houses that are on average worth over $1million, have investment portfolios on average worth over $280,000 and super balances of $229,150 on average. Not surprisingly as wealth accumulators, they take on higher levels of debt as compared to the average Advisable Australian, with over half having a mortgage.
Because they are younger and mostly affluent, they are more likely than the average Advisable Australian to have more financial goals in the next three years, many of which financial advice can assist.
In terms of their personal and family life, they are more likely to be growing their families, considering insurance and to be looking to take advantage of their wealth by going on holidays and buying new cars.
They are also focused on improving their wealth position through portfolio diversification, buying an investment property, as well as reducing and managing debt.
And as far as their professional life goes, almost one in three have recently gone through, or expect to go through, career advancement or career changes. Further, almost one in five (19.7%) are entrepreneurs who are expecting to expand their business in the next three years.
Emerging affluents are digital natives
Given the emerging affluent are mostly gen Y and have grown up as digital natives, they value and have very high usage of internet, mobile and digital services.
Almost eight in 10 (78.4%) say they are extremely or very confident using technology and digital services. They are also more likely to access the internet on mobile devices for non-work activities, with almost half (45.8%) using their mobile phone exclusively for this purpose.
Daily, almost three quarters of emerging affluents use the following services:
- Search for something on the internet (86.3% do it daily)
- Use social media, e.g. Facebook, Instagram or Linkedin (73.9%)
- Use online messaging apps or websites, e.g. Facebook Messenger or WhatsApp (73.4%)
At least weekly, almost three quarters use the following services:
- Read general news or entertainment online (89.5% do it at least weekly)
- Watch video on a streaming service, e.g., Netflix and YouTube (89.6% do it at least weekly)
Newer online activities, such as listening to audio streaming services (like Spotify) and podcasts or online shopping, are also much more popular with emerging affluents compared to Advisable Australians overall. For example, 61.5% of emerging affluents shop online on a weekly basis, compared to only 30.5% of the Advisable Australian overall.
Emerging affluents are also the group most likely to be using digital financial services, including:
- Money transfer services like Paypal (82.3% compared to 72.1% overall)
- Online investment and super accounts (50.5% use monthly compared to 32.9%)
- Buy-now-pay-later services like Afterpay (42.3% compared to 29.2%)
- Digital wallets like Apple Pay (50.5% compared to 31.7%)
- Robo investing services like Raiz (15.6% compared to 5.8%)
Digitising your advice proposition for the Emerging Affluent
Whether the Emerging Affluent is ordering a pizza from Domino’s, streaming a movie on Netflix or getting consumer credit through Afterpay, as customers they expect every experience to be mobile, digital, user-friendly, friction-free and intuitive.
Wealth businesses are not immune to this and will need to reassess and digitise their value proposition, service model, modes of communication and marketing strategies so they can take advantage of the opportunity this client base offers.
Three digitally driven tactics that could be of relevance to wealth businesses today are;
1. Client portals to lead the charge in adding value to the relationship
A well-implemented client portal or mobile app can provide a range of benefits, including improved communication with clients, better client collaboration, better engagement, improved client satisfaction, plus improved efficiency for the business
More than eight in 10 emerging affluents say they highly or somewhat highly want their client portal or mobile app to offer the following features:
- View the household balance sheet (an amalgamation of banking, super, property and other assets)
- Performance reports on their super and investment portfolio
- Track spending, budgets and progress to financial goals
- Securely store wealth related documents (such as their will)
- Digitally sign financial documents (such as insurance renewals and investment advice)
- Chat/meet with their adviser digitally.
Not quite so many, but still seven in 10 (71.9%) want to buy and sell investments on the go. Whilst more than six in 10 (62.1%) want to access financial news, insights and research from their client portal or mobile app
2. Multi-mode client/adviser communication
Given their busy lifestyle, communicating with the emerging affluent needs to be when and where they want it. Technology plays a critical role in this.
When it comes to meetings, the emerging affluent prefer an initial meeting to be face-to-face (84.7%).
However, we see that for subsequent meetings when important advice matters are to be discussed they are almost as comfortable with online meetings (34.6%) as they are with face-to-face meetings.
However, when it comes to the provision of more general information, such as updates on products and services or news, face-face-face is far less critical and digital modes of communication (such as email) become the most desired channel.
3. Acquiring potential clients with digital marketing tactics
When seeking a financial adviser, the emerging affluent typically rely on online sources or on their personal networks (with six in 10 relying on family, friends of colleagues for recommendations).
Almost three in 10 use online ratings and review websites, such as Google reviews or adviserratings.com when looking for a financial adviser. A quarter will start their journey using a search engine, whilst online forums where people can chat and ask questions are also quite popular, with 15% of Emerging Affluents using them.
Being younger and more open to digital sources means it is important for wealth businesses to double-down on their online digital marketing efforts and consider such tactics:
- Encouraging clients to post positive online reviews
- Spending money and time on search advertising – both paid and free listings
- Giving the website a refresh – it should be mobile friendly and clearly articulate, through words and imagery, the digital advice capabilities of the business
- Participate in online forums.
The emerging affluent represent the future market of financial advice firms, so it will be important to spend time with them and understand not only their digital needs, but their investment, financial and other wealth requirements.
To learn more about the Emerging Affluent, visit www.netwealth.com.au/advisableaustralian.
Figure 1: The Emerging Affluent’s desired modes of communication in advice
This article was part of TWM's recent APAC Wealth Technology Landscape Report (2021). Click here to access the full report.
