Thursday, March 30, 2006

Has Your Full Service Broker "Commodotized" You?

A report recently released by Cerulli Associates, a Boston-based consulting firm that specializes in financial services, says that investors with less than $10 million in assets are given short shrift from financial advisers.  The group hardest hit is those with $500,000 to $2.5 million on hand to invest—the report calls them “leftovers.”

Leftovers!  Wow.  A market segment that represents approximately 10% of the U.S. population, that has $8 billion total to invest, is being underserved?  Cerulli Associates says that this group is underserved by financial advisors because its needs are “extremely disparate.” They can’t pigeonhole these so-called “emerging affluent” investors, so they just run them through some standard asset allocation schemes and collect their fees. 

From personal experience, I know that an account that had over $400,000 in it at one point was marginalized by a full service broker.  I’m moving pieces of that account to a couple of online brokers so I can take better care of those assets. 

Several online brokers have announced that they are focusing on a group they call “Mass Affluent,” with $50,000 to $500,000 to invest.  E*Trade ( and Ameritrade ( are leading this pack, offering additional services and specialized pricing to those who fall into this category. 

There are some who have special goodies for account holders with $1 million and up.  RushTrade ( has a special way of calculating margin fees for those who have more than $5 million in their accounts.  Charles Schwab ( has a suite of “Signature Services” for customers with more than $1 million that includes lower transaction fees and some extra research. 

This market segment, if Cerulli Associates is right, is seriously underserved.  There is probably some combination of online tools and offline hand-holding that will hit the sweet spot.  We’ll keep looking. 

Posted by twcarey on 03/30 at 11:52 AM
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