As an accountant, you observe your clients’ business successes and failures every day. However, many accounting firms struggle in their efforts to deliver financial planning services profitably. Why?
Because they go after the wrong market, don’t implement their business model well, or have the wrong business model.
THE MARKET
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Most firms that provide financial planning pursue the people in the top 5 percent income and net worth bracket. The market competing for their attention is crowded; nearly every investment, insurance, planning and estate-planning firm is focused entirely on the wealthiest. Why compete for the same market that everyone has been ardently pursuing for a long time?
The largest open market for providing financial services is the middle, upper-middle and mass-affluent markets. (The “mass affluent” are wealthy, but not in the top 5 percent.)
This group is estimated to include 108 million households. These are the people who aren’t the top wage earners, and who haven’t accumulated substantial dollars for investing.
Consider that the Financial Planning Association recently reported that less than 3 percent of the middle market is currently being served by its professionally credentialed members.
Is the middle market really so wide open?
Think for a moment about the advertising on any televised sporting event. How many commercials are sponsored by firms wanting to help middle Americans with their finances? The answer is zero. The only financial commercials aimed at the middle market are for credit cards and home equity loans that only help to increase debt load, not to build wealth. Most of the ads are aimed at the affluent for investment, planning and accounting firms.
Not only are those in the middle market not being served, but they also desperately need help. The average savings rate is at its lowest point in nearly 75 years, at negative 0.5 percent. Even during the Great Depression in the 1930s, people were saving more money. In addition, many are carrying substantial debt loads on their homes, and they have high credit card and auto loan balances. Foreclosures and bankruptcies are on the rise, and 40 percent of people live from paycheck to paycheck.
Regardless of the causes, people need help. The key is providing planning services that educate and encourage personal responsibility.
People and society are at risk. Those in the middle market are not taking full advantage of their 401(k) plans, buying adequate insurance protection, or saving for future needs such as emergencies and college education. This puts the financial security of Americans at risk, possibly leading to greater dependence on entitlement programs, which would not be good for the U.S. economy.
A major challenge of providing any service is to make those in the target market realize that they need help. As we enter recessionary conditions, many are more aware that financial disaster may strike them unless they make changes and plans. Financial difficulty is easy to ignore when it is on the news; however, when it happens next door or to friends and family, fear increases that it could happen to you.
