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MetLife's $2 Trillion Mass-Market Mousetrap

Lower Investment Minimums, Overlay Enable Firm to Widen Net


MetLife believes that the once-ignored "emerging investor" is becoming critical to asset managers and advisers as firms try to figure out how to retain and recruit new clients.

Eighty million households have $25,000 in investable assets, according to MetLife, yet until now account minimums of $100,000 and above have prevented this rapidly growing group of up-and-coming investors from getting the investment advice they need.

This is why Jeffrey Wilk and Rebecca Kovatch, vice presidents of MetLife Broker/Dealer Group, have decided to focus the group's strategy this year on this burgeoning segment of the market.

"You have the do-it-yourself investor who may have been putting $10,000 or $35,000 in an individual retirement account over at Fidelity or any mutual fund company, but they weren't getting advice and rebalancing on an ongoing basis," Wilk said. "Our focus is how do you take the wealth management platform that is traditionally available to a client with $250,000 or more to invest and provide those same services down to the mass market."

Many have said it couldn't be done.

At the American Bankers Association conference in Phoenix earlier this month, advisers spoke about how hard it was to cater to down-market clients and make money at the same time.

The dilemma is that while mass-market clients can rarely afford investment advice and ongoing guidance, advisers can't afford to work with lower-end clients. Yet MetLife's new fund management services, which offers automated investment advice to the $10,000-and-up investor, allows advisers to access what Wilk calls the "$2 trillion mass market segment."

How did MetLife do it? Lower minimum investments and overlay management.

MetLife worked with the managers of its 10 mutual fund portfolios to decrease minimum investments. The average account size is $30,000, which is held in a standard brokerage account. The portfolio management roles are then overlaid so MetLife can monitor the client assets against their risk profile and automatically rebalance them.

In November, MetLife expanded its fund management services to all its registered reps to enable them to give their clients more attention and attract more assets.

MetLife's fund management services comes with a 1% fee, three times the size of the 25 basis point 12b-1 fee, which may not exist at all by the end of 2010 if Securities and Exchange Commission Chairman Mary Schapiro has her way.

"Once 12b-1 fees go away, advisers won't get compensated at all," Kovatch said. "The question is how do you create a solution and get fairly compensated at that level?"

Kovatch said that while many advisers see the Baby Boomer population as their sweet spot, in five, 10, or 15 years from now there's going to be another affluent generation coming up behind it: the echo Boomers.

"Today you're talking to the mothers and fathers, but they have kids, and eventually they will want their needs to be met," she said. "The hardest thing to acquire is the relationship."

Wilk said emerging investors may have small account balances now, but the idea is that these are the clients who advisers should be gaining traction with and growing with to build their future client pool.

Kovatch said that although MetLife always puts the client first, the firm wants to make sure from a practice standpoint that its 10,000 advisers in the field are using their time well. "We don't want our advisers to spend half a day managing a $10,000 account," she said. "We want to make sure what we create provides a better solution for the adviser and the client at that dollar level. We want it to be a win-win."

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