Help middle-class clients

By Graham F. Scott | June 7, 2012 | Last updated on June 7, 2012
6 min read

Conventional wisdom among advisors dictates high-net-worth clients are the most desirable — after all, they have more money. But subscribing to conventional wisdom can cause you to miss opportunities.

Read: Advisors bypass small households

What about the nearly two million Canadians with between $200,000 and $400,000 in investable assets? This middle layer is often underappreciated, but can provide plenty of lucrative business to savvy advisors. Al Roissl, managing director of Desjardins Financial Security Integrated Network, Ontario Central Region, Toronto, encourages advisors to think smaller first.

“Too many times new advisors want to chase these large accounts, and it’s not going to happen,” he says. “Somebody with more experience is going to scoop them. I always encourage advisors to go after that middle-class marketplace. There are a lot more of them, and they’re underserved.”

Plus, “They’re the ones who are going to receive the inheritances from the previous generation,” Roissl adds. “And it’s just a matter of time before that happens. If they’re treated well when they’re a smaller client, they’re going to stay with you and become a bigger client.”

Pour nest egg into a large bowl. Whisk well, then fold into remaining ingredients. Bake time: 15-to-20 years


People in this asset class generally have one goal: a secure retirement. Middle-class Canadians with assets above the $200,000 threshold are likely to be near retiring anyway, says Keir Clark, a branch manager and senior wealth advisor at ScotiaMcLeod in Fredericton, NB.

Jake Nemec, a financial planner in Victoria, BC’s main BMO branch, says “Forty to 65 is the sweet spot.” Clark adds clients tend to have one of two perspectives. Some are what he calls ants: frugal, diligent savers who painstakingly build assets over the long term and are riskaverse.

The challenge is to help these clients understand how they can make their money last, because they’re starting out with a smaller pool of capital compared with their wealthier counterparts. On the upside, they’re more likely to have reliable pension plans, but that money is managed for them generally without their input.

Read: Stress-testing your retirement plan: how big is my cushion?

With this group of very conservative investors, Clark says, “you need to convince them that they need to take a little bit of risk to achieve the rates of growth necessary to keep up with inflation.”

19% of canadian households studied by pricemetrix have between $200,000 and $400,000 in investable assets.

Since there are about 12 million households in canada, there could be as many as 2.3 million in that category. He calls the other group grasshoppers: higher-income earners who haven’t gone through a planning exercise. They have high return expectations, and are often willing to take risks. But it also falls to the advisor to coach them into paring back their higher-flying lifestyles. That’s because even though $400,000 in investable assets seems like a lot, says Nemec, “Over a 40-year drawdown period, it may not be enough to retire on. But if someone has a defined-benefit pension, it may be more than enough to supplement that pension.”

The category your client falls into affects the conversation you have, but it has less impact on the investment strategy. Portfolios for most mid-range clients tend to look similar, and with good reason: with many clients in this bracket close to retirement age, there’s often less room for course-correction (younger ones are likely to be higher earners, so they have more options). They’re chugging toward retirement, so capital conservation and modest growth are the order of the day.

“They’re not shifting assets all the time,” says Roissl. So if you put the right system in place you can manage those assets quite cost-effectively. They’re not high-maintenance if you set them up correctly.”

At this asset level, pooled investment products are more cost-effective. “That’s necessary because it’s nearly impossible to get them appropriately diversified” without such instruments, says Clark.

ETFs are the rising star in this category, he says, because there’s a growing selection, and these pricesensitive clients appreciate the lower management fees (see “A buffet of ETFs”).

These aren’t exciting portfolios: a broad-based equity index fund or two; some GICs or bonds. For portfolios above $300,000, Roissl says, a dividend-paying bluechip stock like a bank or a phone company passes for an aggressive play. But that lower-maintenance portfolio makes it possible to serve a large enough number of midrange clients to turn a profit.


So how do you get them in the door in the first place?

It’s less of an issue for advisors attached to namebrand banks, since many clients in this demographic like a logo over the door, and already visit local branches regularly. Independents, meanwhile, get referrals.

“You bump into people in the community—the chamber of commerce, your church, a sports team [or get] personal referrals from existing clients, and professional referrals from accountants and bankers and lawyers,” says Clark.

Insuring mid-range clients is another source of revenue open to independent advisors. Focus on younger clients: they have fewer assets but need insurance to protect dependants. As they age, assets (and therefore investment revenues) grow while insurance needs drop.

This class of clients lacks the time or expertise to spend time interviewing multiple advisors. So the choice comes down to a good referral and whether they feel valued when they walk in or phone.

Read: Five pieces of advice for young clients and prospects

That can have implications for structuring your practice. A larger number of lower-revenue accounts means a greater administrative workload, so a partnership structure, allowing a few advisors to share overhead, administrative assistance, and marketing costs is de rigueur.


It’s important they feel up to speed on what’s happening with their portfolios and their overall financial plans. And some of the time and work you’ve saved with a low-maintenance investment portfolio must be plowed back into communications. It’s not just altruistic. Keeping mid-range clients informed is crucial to building a sustainable book. These clients are anxious about the economy’s potential effect on their retirement plans.

“They know a bit from what they see in the newspaper, and you have to be careful they’re not using headlines to make their final judgments,” says Roissl.

Communication is the most visible part of the service you’ll provide. The challenge is doing it cost-effectively, since at this lower level of profit margin, volume is critical. The traditional annual face-to-face or quarterly phone call is a start, but with more clients, that can tie up lots of time and resources.

Read: Social networking leads to success

Clark advocates two cost-effective ways to keep in touch: investor workshops (see “The cost of a sensational seminar”) and e-mail lists. Both deliver updates, guidance, and reassurance on a high-volume, low-cost basis. Modern e-mail list-management services like Constant Contact, MailChimp, and Vertical Response offer a cheap, user-friendly way to broadcast.

Well treated, clients in the meaty middle can be the foundation of a profitable practice.

“Some of the most rewarding relationships are in this group,” says Clark. Done right, it can be rewarding financially, too. Graham F. Scott is a Toronto-based writer.

Graham F. Scott