Middle-income families offer opportunity for financial advisors, report says

Although middle-income Americans often have limited means, they do present valuable opportunities for agents who are willing to offer the financial guidance they need to protect themselves and their families, especially in today’s high-inflation environment and volatile markets.

A Primerica special report titled, The Financial Condition of Middle-Income American families Heading into 2023, identifies some of the numerous challenges middle-income Americans often face.

Researched and written by Amy Crews Cutts, Ph.D., economic consultant to Primerica, the report combines data from the monthly Consumer Price Index, the Federal Reserve Bank of Atlanta, and Primerica’s Financial Security Monitor – a national survey that measures changes in the sentiments of middle-income families in the U.S. about their finances – to present a clear picture of the pressures these households face.

“High inflation stings for everyone, but it’s especially painful for middle-income American families.”Amy Crews Cutts, Ph.D., economic consultant, Primerica

“High inflation stings for everyone, but it’s especially painful for middle-income American families,” said Dr. Cutts. “With prices increasing at the fastest rate in a generation, the middle-market is now spending their savings to make ends meet. Even so, most middle-income households are optimistic about their future and show a remarkable resilience in the face of economic headwinds.”

Among the major findings of the survey:

• Savings take a hit. A large majority (82%) of respondents to the survey either curtailed or stopped saving for the future or tapped into existing savings to make ends meet as their income fell behind the cost of living.
• Inflation’s disproportionate impact. In 2022, food, gas and utilities prices remained elevated, peaking in the second quarter at 18.2% higher than the previous year. The full consumer price index (CPI) peaked at 8.6% in the second quarter.
• Increase in missed payments. Five percent of respondents thought they would likely miss a debt payment in the fourth quarter: yet a significantly higher percentage of 18% reported being delinquent when the quarter ended.
• Spending higher than anticipated. Only 15% of survey respondents in the third quarter survey planned to spend more money overall in the fourth quarter. However, more than double that share – 33% – ended up spending more than planned.\
• Most rank personal finances positively. When asked about the condition of their personal finances in the survey, 53% of respondents in the fourth quarter of 2022 reported they were in good or excellent shape; however, this is down from 60% a year earlier.

Business case for serving the middle market

Notwithstanding their often challenging financial situation, the middle market does present a profitable market for many advisors.

As noted by Brian Haney, founder, CEO with The Haney Company, advisors have a significant number of opportunities working with clients in the “middle market.”

“As this growing segment of the population refocused on continued recovery from the pandemic and recent market turmoil, financial professionals can and should be there to lend a helping hand to guide people towards financial success. With a mixture of competing financial needs and concerns, the right advisor can make all the difference,” he added.

Haney said that he has successfully worked with several families in this market, often starting by helping them optimize their budget and monthly cash flow, and working to protect themselves with the right insurance options.

From there, he added, these families need investment help and often, wealth management and estate planning considerations follow.

“They are great clients who appreciate advisors willing to meet them where they are, and build collaboratively with them towards a financially successful future,” Haney said.

Incorrect market assumptions

The mistake that many advisors make is making the wrong assumption about this part of the marketplace, Haney pointed out. “We assume these are households of limited means and that there are therefore limited opportunities. And while that’s a sad way to approach helping people (based solely on how much money we might make), it’s also woefully misguided. Many of these families end up writing good insurance cases, have investable assets that appreciate significantly, and when given the chance to work with a caring professional, can be lifelong clients.”

Primerica’s Financial Security Monitor is a quarterly national survey designed to monitor the financial health of consumers with annual household incomes of $30,000-$100,000. Using Dynamic Online Sampling, Change Research polls more than 800 adults nationwide with incomes of between $30,000 and $100,000.

Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected]. 

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