A Guide

to
Affluent Consumer
Behavior
A Guide to Affluent Consumer Behavior 2

A Guide to Affluent Consumer Behavior

Executive Summary

The affluent market is an attractive arena to promote and sell a product because
of the market’s higher spending power. If acquired as customers, this consumer
base could potentially lead to more profit for one’s company or organization. But
the introspective marketer knows that understanding trends affecting these
consumers is just as important as targeting the affluent consumer. Such trends
that are drawn from affluent consumers’ behaviors include their want for personal
attention and personal services, convenience and all-inclusiveness.

This guide will cover trends of affluent consumers in a variety of industries. In the
wealth management industry, the focus will be geared towards estate planning
and why many affluent people are procrastinating in this area. Additionally there
will be information on the importance of client-centric advisors.

The real estate section of the guide is centered on the wants and needs of the
pending affluent Baby Boomer retirees—where do they want to live, what types
of communities would be ideal, and what is holding some of them back when it
comes to real estate.

In the non-profit sector, there is a sizable untapped section of the affluent market.
The guide explores trends in what attracts the wealthy to donate. Furthermore,
the importance of family-centered events is an important trend to recognize
within the affluent market.

Retail and travel industries are very much complementary in the area of what the
affluent customer desires. The experience and personal service are very
important aspects to the wealthy individual, as well as quality.

If one is motivated to be continually educated and updated on trends of the

potential client, customer, or donor, in his or her own industry as well as other
industries, it would greatly improve marketing campaigns and sales. The
consumer recognizes when someone understands their desires and actually
follows through. Making that personal connection is important in all industries.

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A Guide to Affluent Consumer Behavior 3

A Guide to Affluent Consumer Behavior

The affluent market is important to veritably all businesses and organizations.
They many times generate the largest amount of sales in retail, wealth
management, real estate, travel, and are some of the largest donors of non-profit
organizations. But what do all these industries have in common? First, they all
need to understand the behavior of the affluent in order to produce effective
marketing campaigns and selling methods, which in turn will generate profit. This
guide is broken down into industry sectors, but does not suggest the information
will not be meaningful to all markets.

Wealth Management
This hotly contested market has garnered the attention of small and large wealth
management firms, banks, in addition to trust companies and CPAs. One reason
for this is the needs of the affluent in developing a comprehensive plan. If one
focuses on estate planning, in particular, they will see a significant untapped
market and also an opportunity to improve relationships with current clients.

The Unplanned Financial Future of Affluent

The graph here Source: PNC’s Wealth and Values Survey (2005); based
Individuals
illustrates that there is on individuals with over $10 million in investible assets

still a large percentage of

affluent individuals Do Not Have a Will 43%
without wills or trusts.
The majority of people Have Not Created a Trust 47%
who lack estate planning
cite procrastination as No Comprehensive Financial,
27%
the culprit.1 Estate, or Investment Plan

Source: PNC’s Wealth and Values Survey (2005); based

on individuals with over $10 million in investible assets

Why are people procrastinating?

Allstate Corporation’s “Retirement Reality Check” survey segments pre-retirees
into five categories according to his or her personality type. The “procrastinators”
make up three of the five segments. They are as follows:
• Optimists: they aren’t worried about planning for retirement; most have
saved less than $100,000
• Pessimists/Worriers: they have careless spending habits
• Realists: they believe they will have to work later in life and the majority
are nervous and dread retirement 2

1
MainStay Investment’s 2006 Across Generations Survey from the article, “Intergenerational
Referrals,” Financial Planning, by Marshall Eckblad, December 1, 2006.
2
Gary S. Mogel, “Personality drives retirement savings,” Investment News, November 14, 2005,
6 (includes all bullet points).

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Being educated on and understanding why a potential client is not properly

saving for retirement allows you to mold your sales pitch specifically to each
person’s individual needs. Of the many different surveys that focus on retirement
trends; the one thing to take away is that there is still a segment of the affluent
market that has not seriously planned for retirement, and by understanding their
situation, it will help you build solid relationships.

When Last Met with Advisor about

Some wealth advisors
Estate/Retirement Planning
lose touch with their
clients who have Within Last Year
started retirement and
1-3 Years Ago
estate planning. This
24%
lack of contact can 38%
4-6 Years Ago
diminish relationships
9% 7-10 Years Ago
and eventually profits.
In a CEG Worldwide 5% 10+ Years Ago
9% 15%
publication titled
Never Met with an Advisor
“Capturing the High- about Retirement
Net-Worth Investor,”
the authors contend, Source: Phoenix Marketing International‘s affluent and high net worth
“Today’s affluent trend data (2007); based on individuals with over $1 million in investible

investors want more.

They want real relationships with their financial advisors.”3 They want to be
involved in their financial planning; they want the personal experience, which can
also be seen as important to affluent consumers in other industries. The
researchers of the executive summary also found that “client-centric” advisors
are rarer than “investment-centric” advisors, but the former had around 30 times
more assets than the latter.4 This information can assist you whether you
specialize in estate planning or another aspect of financial planning to the
affluent. And if one looks at the graph above, there is surely room to improve and
maintain contact with clients cost-efficiently.

Affluent individuals are somewhat lagging in the area of retirement planning for a
variety of reasons, and it is an opportunity for wealth managers to capitalize.
Additionally advisors should recognize the profitability of nurturing relationships
with their clients. Both of these areas can be improved through event campaigns
that allow personal time with clients or potential clients. Beth Allan, of Phoenix
Marketing International states, “The higher you go up on the food chain, the more
important one-on-one sessions are.”5 Events are beneficial means to harvest

3
John J. Bowen, Jr., Russ Alan Prince and Patricia J. Abram, “Capturing the High-Net-Worth
Investor,” CEG Worldwide, LLC, 2004, 2.
4
Ibid, 4.
5
Charles Paikert, “Marketing efforts to affluent taking on a personal touch,” Investment News,
May 16, 2005, 44.

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A Guide to Affluent Consumer Behavior 5

interest in your firm among potential clients or in particular estate planning

clients, in a more personal manner.

Real Estate
The Baby Boomers are setting a trend in the real estate industry. As Baby
Boomers begin to retire, they are looking for a comfortable place that suits all
their needs. The graph below illustrates what the affluent Baby Boomer is looking
for in a retirement home, whether they keep their present house or purchase a
new one.

Real Estate Trends among Retiring Affluent Baby

Boomers

Prefer to Buy a New/Different Home to Get What

They Want
35%

Want to Design/Build a New Home to Meet Their

Needs
17%

Plan to Upgrade Current Home 15%

Plan to Purchase a Second Home 12%

Rather Live in the Suburbs 67%

Rather Live in Rural Area 14%

Plan to Move to a Better Climate 51%

Plan to Move Where There is a Lower Cost of

Living
46%

Source: Study commissioned by Hanley Wood, 2006; respondents were homeowners

between the ages of 50 and 60, with annual household incomes of $100,000 or more

This graph illustrates Baby Boomers’ desire to follow their personal pursuits, and
one of the top desires of this demographic segment is a house in a warm
suburban area. What does this mean for developers and real estate agents? A
noticeable shift of retirees moving away from high-priced housing markets to
climate-friendly markets. The U.S. Census Data pinpointed increased movement
away from high-priced areas such as the Northeast and Midwest, towards lower-
priced markets in the South and West (mountain area).6 Moving to these markets
will allow retirees to put additional savings into their investment accounts; they do
not have the additional assets to invest in real estate.7
6
Broderick Perkins, “Americans Are Moving To Cheaper Housing Markets,” Reality Times, April
28, 2006.
7
Broderick Perkins, “Baby Boomers Let It Roll On Real Estate,” Reality Times, May 31, 2006.

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Mass affluent individuals ($250,000 to $1 million) are somewhat cautious when it

comes to real estate because:
• They already have a little less than half of their total assets in real estate
• They need more readily available cash—real estate is illiquid
• Real estate is becoming more risky
• Emotions weigh more than potential returns8

Cost-efficient, active communities in warmer areas will appeal to the affluent

Baby Boomer demographic segment. However, they are not going to sacrifice
luxuries and amenities to which they are accustomed. The pending retirees who
have not properly saved for retirement will be more cautious when it comes to
real estate, but for the retirees that have saved, they will be looking for
somewhere that fits all their needs and desires.

Non-Profit Giving
The affluent philanthropic donor is very important to non-profit institutions
because they make up a large part of total contributions. But there are still many
available donors that need a little encouragement to begin his or her
philanthropic endeavors.
Non-Profit Giving Trends of the
This graph demonstrates that Wealthy
about half of the respondents Currently
to the Luxury Institute’s Donate
survey are not currently Donate Now & In
donating. This is a great 17% Their Wills
opportunity for non-profit 35% Plan to Give
organizations to garner 13% Soon
support for their causes. 6% Do Not Plan to
29% Donate
Unsure Whether
Will Donate

Source: The Luxury Institute and Charles Maclean’s (PhilanthropyNow) survey Philanthropic Beliefs and Behaviors of
the Wealthy, 2007; the surveyed had an average household income of $330,000 and average net worth of $2.4 mill.

What are effective measures to attract affluent donors?

• Challenge the norm with your message
• Do not appear wasteful
• Create diverse and invigorating communications across all avenues
• Generate a dialogue between your values and their values
• Focus on life stages and events9

8
Broderick Perkins, “Affluent Often Don’t Boast Reality Investments,” Reality Times, April 14,
2006 (includes all bullet points).
9
Mike Spicer, “Donor Dilemma,” Campaign, October 6, 2006, 7 (includes all bullet points).

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These points will assist in accumulating returns on marketing campaigns

because new and fresh messages are essential in a market that constantly
targets the same people. An organization needs to stand out and make a
connection with the recipient in order to harvest interest in one’s cause.

Another way of getting people excited about your cause is special events, not
just for mature individuals, but for the whole family.

Affluent Parents' Influences on the Philanthropic Activities

of Their Children

Encourage Children to Take Part in

91%
Charitable Activities

Children Who Take Part in Charitable

67%
Activities

Children Who Have Donated Part of Their

62%
Money

Source: Third Annual American Express Platinum Luxury Survey, 2006;

respondents had an average household income of $472,000 and an average
net worth of $4.3 million

The preceding graph illustrates that affluent families are very interested in getting
their children involved in and educated about philanthropy. Non-profit
organizations can capitalize on this and implement family-oriented events in
order to obtain two generations of donors. Not only do parents influence their
children, but children are having more influence over their parents than in the
past. A child’s interest in a cause is a type of consumer-to-consumer marketing,
so family events can be quite effective.

A potential donor’s connection with a cause is one of the most important aspects
of a marketing campaign, whether in direct or event marketing, since that usually
triggers him or her to become a donor.

Retail and Travel

The wealthy consumer has similar desires when it comes to retail and travel. For
many wealthy consumers, fulfillment of their needs and wants is very important in
their purchasing process.

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Consumer Beliefs Comparison

Wealthy Consumers’ Beliefs Affluent Consumers’ Beliefs about

about Business Success Business Success

Inherent Product Quality Inherent Product Quality

Matches Taste Price

And Aesthetics

Brand Trust Brand Trust

Source: Worth-Harrison Taylor study on the Status of Wealth in America,

2005; wealthy denotes consumers with liquid assets over $5 million and
affluent denotes consumers with annual income of $75,000

If one looks at the charts above, the wealthy and the affluent consumer have
some similar and some different ideas about what they look for in a product or
service. The major difference is that price, in itself, is not an issue for the wealthy.
Rather, it is more important if the product or service matches what they have in
mind or their tastes. On the other hand, price matters to the affluent consumer.

So what are some services that wealthy individuals desire? According to the
Yesawich, Pepperdine, Brown & Russell’s 2006 Portrait of Affluent Travelers
survey, some attributes that are appealing to affluent consumers when choosing
a hotel are:
• Complimentary delayed check-out (89%)
• Express checkout (89%)
• Security staff to ensure safety (87%)
• Premium bedding (85%)
• Concierge staff and services (81%)
• Choice of newspaper daily (78%)

Convenience, comfort, and personal services are among the top desires of
affluent travelers. Again, the focus is on the personal needs of the consumer.
Personal experiences that tap into the specific tastes of the wealthy consumer
are important in travel and retail sales. When marketing to the wealthy consumer,
concentrate on the experience, rather than the product. When marketing to the
affluent consumer, focus on the price to value ratio; this is more important to
them than the experience and matched tastes, although it is a plus for the
affluent consumer if the product or service does match the aesthetic he or she
had in mind.
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Conclusion
The affluent consumer has specific needs and wants in the different markets
discussed in this guide. Although, there are some common threads that run
through different markets—affluent individuals want personal attention and
connections with the provider of potential products or services they may
purchase. Convenience and all-inclusiveness also are important to the time-
pressed wealthy individual. Although there are common themes, all individuals
act in their own ways. Therefore, the more prospects one acquires, and the
creation of a clean, concise, and convincing marketing campaign increases the
chances of a profitable return for the company or organization.

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