What to know about serving households with $5M to $10M in investable assets

A report from Hearts & Wallets reveals households with $5 million to $10 million in investable assets feel “very experienced’ with investing, have a high comfort level with market volatility, and are increasingly interested in generating income from their investments.

This segment has grown substantially over the past 2 years and now represents 1.8M households that control $14.4T in investable assets. In addition, more of these households are in pre-retiree and earlier-life stages than they were 2 years ago.

Investment knowledge of these households

Virtually all households in this segment are aware of their investment portfolio allocation by asset class, up from 70% in 2015, the survey added. For households with $5 million to $10 million in investable assets, confusion about pricing is also at an historical low. Only 5% of these households “don’t know” how much they pay for their primary and secondary stores, which is much lower than the national level of 25% of customers. More of them reported that they pay through services than products.

In addition, for the first time, the survey said, exchange traded funds (ETFs) are among the top three investment products most frequently owned, surpassing individual bonds. Households with $5 million to $10 million in investable assets also trade independently and hold bullish attitudes about artificial intelligence (AI) and technology-driven financial advice. Their perception of services as being expensive is rising.

Why ETFs are popular

Households with $5 million to $10 million in investable assets have a growing appetite for ETFs, which went from being 5% of their portfolio in 2022 to 11% in 2024, said Laura Varas, CEO and founder of Hearts & Wallets. ETFs offer low-cost, diversified investments, liquidity and transparency of holdings and ETFs are also more tax efficient than mutual funds, she explained.

At the same time, Varas added, these households are shifting away from separately managed accounts (SMAs). In 2022, they allotted about 13% to SMAs, which dropped to 5% in 2024. “Some reasons SMAs may be falling out of favor are because of the high investment minimums (unlike ETFs), complicated fee structures, and difficulty in transitioning an SMA from one store to another,” she said.

Other frequently traded instruments

Varas also said that these households report their overall average portfolio allocation by investment product type being led by mutual funds (25%). “That percentage has remained fairly consistent during the past three years,” she said. “They hold over 20% in individual stocks, most likely because of market appreciation. In 2024, they held 12% in cash and 11% in ETFs. Allotments to both cash and ETFs have been growing the past three years. None of the other products in their portfolios break double digits. Together, CDs and high-yield savings, fixed and variable annuities, SMAs, robo-advisors, private equity and other holdings accounted for 28% of their portfolios in 2024.”

Finding success in serving this market

So, what are some of the steps that advisors can take to successfully work with households in this market segment? “Year-over-year, these households showed a dramatic spike in the incidence of the investment goal to generate income from my investments, so one approach is to lead with income-oriented investment solutions to respond to the spike in the income goal,” Varas said. “They are much more likely than national to have a bequest motive, so ensure estate planning capabilities address the strong bequest motive. Over half of these households are willing to tap home equity to age in place, so recognize that this segment has a general openness to lending solutions,” she added.

In addition, Varas pointed out, these households understand the products in their portfolios. They are savvy investors with a growing appetite for ETFs. Their acumen should be respected.

“Firms should also be thinking about how to counter some potential red flags for full service among these households,” Varas added. “They like to trade independently of their financial advisors and hold bullish attitudes on artificial intelligence (AI) and technology-driven financial advice. Most concerning, their perception of services as being expensive is rising. Even if that perception isn’t reality, it’s something advisors should address by spelling out the value they offer and better explaining pricing both within products and from advisors/firms.”

“Loyalty and cross-selling metrics are key to understanding future market shifts within this segment,” added Beth Krettecos, Hearts & Wallets subject matter expert. “Firms that understand their financial attitudes, goals, and behaviors will be better positioned to earn trust and sustain strong relationships.”

Top asset managers influencing these households

The survey also shared the top asset managers that are influencing the wallets of these households through the investment products they own:

No. 1: Fidelity

No. 2: Vanguard

No. 3: BlackRock/iShares NET

Among stores, Fidelity reaches more of these households than any other competitor. In addition, Fidelity, Morgan Stanley, Vanguard and Charles Schwab achieve higher average share of wallet (SOW) from their customers who have $5 million to under $10 million than other top stores and the industry average.

The top five stores exceed industry averages on many loyalty and cross-selling metrics, the survey added. Vanguard leads in high trust, followed closely by Fidelity.  Bank of America Merrill NET performs the best on high customer understanding of how it earns money. Vanguard leads in customer likelihood to recommend (LTR) and E*TRADE is #1 on the list of customer intent to invest more.

The Hearts & Wallets report, The Market for Households with $5M to under $10M Investable Assets: Attitudes and Competitive Buying Patterns, provides an understanding of the market size, attitudes, wants and competitive buying patterns of U.S. households with $5 million to under $10 million investable assets.

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