Finding Today's Mr. Affluent.

• Author: Hallowell III, Robert H.
• Position: Financial services industry relies on direct marketing

Explosive. Phenomenal. Unprecedented. These are just some of the superlatives used in describing the recent growth of the market in high net-worth individuals, the fastest-growing segment of the financial services industry.

Both large and small banks have found that one of their best tools in reaching and gaining a larger wallet share of this market is with an old marketing ally--direct mail or, as it's more often called today, database marketing.

"Database marketing is the most critical thing I need in order to do my job effectively," says Wendy Kopp, vice president for marketing planning at Wilmington Trust Co., Wilmington, Del.

Ken Dorsett, head of Pittsburgh-based Everest Research Exchange Inc., says, "The direct mail marketing piece is now a critical part of the overall package for organizations that are looking to garner a larger share of the market. It's a rifle--not a shotgun--approach. And it works."

Sandy Mico, a Portland, Ore., strategic marketing consultant with 30 years experience, says that the only way that smaller niche players--community and independent banks and smaller trust companies--can compete is by adding direct marketing. Even banking conglomerates with vast branch networks know that their wealth management services are often the best kept secret in the bank. They're invested heavily in buying up brokerage firms, money managers and insurance companies. If they're going to make that pay off, they've got to find prospects and alert them to their capabilities.

How big and how important to banks is the market in high net-worth individuals? Dorsett of Everest Research Exchange notes, "In the past five years alone, the number of affluent individuals--those with a minimum net worth of $500,000 or more--has risen from 3 percent of the U.S. population to over 6 percent." That translates to 7 million households. And the increase isn't limited to the emerging affluent. Further up the ladder, the number of "penta-millionaires," those with a net worth of $5 million or more, has risen to a remarkable 600,000!

Factor in published reports that superaffluent individuals spend, on average, $22,000 annually for financial services on both sides of the balance sheet, and you have a very significant financial pool. "This business, on a risk-adjusted basis, is the highest value in the industry," says Dorsett.

Why the market is so strong

Sandy Mico, the consultant--a former marketing executive at First Interstate Bank and Wells Fargo & Co.--says the market in high net-worth individuals is good partially because of the impact of new Internet companies and private-to-public business transfers. But, there is more to it than simply the influence of the new economy. "There's a huge intergenerational transfer of wealth taking place. People who own companies no longer feel the need to hold on to them until retirement. They're selling or transferring them sooner than ever before."

Mico compares this trend with that of a generation ago when "much of the trust management client base was comprised of beneficiaries of huge inheritances from early founders of core industries. Today, there's more capital in the hands of more people at earlier points in their life."

And the opportunities aren't limited to the giants of the industry or centered solely in major cosmopolitan areas. William Heaslip, president and CEO at Merchants Trust Co. in Burlington, Vt., looks at the tremendous increase in...