Banks targeting the mass-affluent need to narrow their focus, according to a new report from consulting firm Booz & Co.

Specifically, they need to go after the "rising mass-affluent," or Generation X, the segment identified as having the most potential for accumulating wealth. This demographic grew up in the prosperous 1980s and can be a potentially more attractive target than older baby boomers who have strong relationships with investment brokerage houses, the report contends.

"The rising mass-affluent have explicitly stated that they are more open to having banks provide and meet their investment needs [than are baby boomers]," Ashish Jain, vice president of Booz & Co., and an author of the report, said in a telephone interview.

According to the report, more than half (51%) of the rising mass-affluent say they would consider using their primary bank for investing, compared with only 37% over the age of 50 who said they would.

Younger Gen-X investors were had the greatest appetite for financial guidance. They were also more frugal, more self-reliant and more likely to save than other mass-affluent consumers. Moreover, many plan to work beyond the retirement age of their predecessors, giving them a longer investment horizon for creating wealth.

While the rising mass-affluent began their careers during a time when the Internet was creating new wealth-generating opportunities around the world, they experienced enough economic turmoil to strongly value financial preparedness in lean times, the report explains.

So far, no bank has yet targeted the rising mass affluent market explicitly, Jain said. Instead, banks have aimed their efforts broadly at the segment and have struggled given the impracticality of targeting such a diffuse and broad swath of customers.

The size of the mass-affluent market makes it easy to understand why banks have eyes bigger than their stomachs. According to the research, the mass affluent outnumber their wealthier high-net-worth counterparts by nearly two to one, with some 13 million mass-affluent U.S. households representing $7.5 trillion of investment capital.

It's the profitability of the mass- affluent market, however, rather than its size, that makes it attractive, according to Jain. "This is a market that has a big profit pool," he said, adding that mass-affluent customers are four to six times more profitable than typical mass-market customers. He also noted that mass-affluent customers generate 60% to 70% of total customer profits for retail banks even though they make up only 20% to 30% of banks' customer base.

"It's a profit gold mine," Jain said.

As profitable as the market segment is, banks have done a poor job of cultivating mass-affluent clients, with brokerage firms currently managing most of the group's investments.

Banks were busy chasing customer deposits and focusing on their lending and mortgage needs, and never focused on getting their investment business, which set them back relative to brokerage firms, Jain said.

"Most banks until post-financial crisis have never truly focused on getting the full wallet share of the customer," Jain said.

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