Financial Services Firm Uses Enabled Concept to Identify Markets for Wealth Management

Overview and Problem Summary

A well established financial services firm was interested in developing a wealth management business.  The central question was how to select the market(s) in which to roll out the new business.  To answer this question, the firm asked us to build a model which estimated the total household wealth by zip code and to forecast the revenue potential for each.

The Solution

To start, we constructed a database of household income using IRS data.  We then developed a model which utilized the household income to estimate household wealth, by focusing on the taxes paid on various asset classes.  The database was then segmented into percentiles by wealth as well as wealth density, i.e. average wealth per household per square mile.

The database contains wealth estimates on 147 million households across more than 27,000 zip codes.

Using the segmented database, we were able to construct a model of the potential revenue opportunities which focused on the zip codes which were likely to be the most productive.

Key Features

A key feature of the model was its identification of the skewed wealth distribution: 78% of the wealth is in the top 20% of the population

Results

The wealth management revenue prediction model recommended a focused go-to-market strategy.  The initial recommended segment consisted of a total of approximately 2,000 zip codes across 14 states.  The estimated revenue potential for the segment was approximately $165MM with average assets under management of $16B.

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