These days, bank advisory programs focus more and more on mass-affluent or higher on the socioeconomic scale. That is, the richer people. Some of this is a question of emphasis in the marketing, but other providers are more explicit.

Last year, for example, Merrill Lynch announced it would reduce payout to advisors who served clients with less than a $250,000 account. It turns out that the firm's well-touted online platform, Merrill Edge, has become the repository for the not-so-affluent clients of their wealth management division.

The shift reflects a number of changing realities in American society: the shrinking middle class, a slower climb up the economic ladder for young people and the aging of the baby boomers.

It also reflects a belt-tightening mind-set by banks intent on preserving their profitability. But selecting a target market is only one part of a business strategy and the same pressures that are showing mom and pop the door may also change the bank channel in other ways-not all of them promising for advisors.

A Question of Profit
So why the renewed emphasis on the high-end? In a word, "money," says Howard Diamond, managing director and general counsel of Diamond Consultants, a Chester, N.J. recruiting firm for the advisor industry.

Instead of "managing mom and pop's IRA," Diamond says, an advisor can earn more profit on the same amount of work managing large accounts.

The same math holds true for the firm: an advisor who manages 1,000 accounts in the $75,000 to $100,000 range might be managing the same amount of assets as an advisor who runs 100 larger accounts. But the 100-client book is more profitable because there's less paperwork, and because it's usually more fee-based, Diamond says.

Paperwork notwithstanding, what has advisors looking for more "net worthy" clients is the fact that savings rates have plummeted among the middle class, making that group less attractive for prospecting.

In the early 1980s, Americans saved as much as 8% of their paychecks, according to Federal Reserve figures. By 2012, that rate had fallen to less then 4%.

Of course, savings rates could fall again-after all, they were sometimes less than zero in the past decade.

Or, after-tax incomes that the middle class takes home could even increase after a three-decade decline (there is the mathematical concept of reverting to the mean, after all). Which would mean more allocation to savings and investing.

But until that happens, advisors are faced with two potential markets to prospect: one a relatively smaller group with a lot of money; and the other a much larger group that doesn't have nearly as much. And their actions have clearly indicated which they prefer- and it's the smaller group with a lot of money.

In part, the focus upward reflects a changing reality of the distribution of income. In 1970, upper-income families brought home 29% of total income, according to a research report by the Pew Charitable Trust. By 2010, their share of total income had grown to 46%. Middle-income families, meanwhile, brought home less as a percentage: 62% in 1970 and 45% in 2010.

It's not just income-that same upward shift can been seen with stock ownership too. According to Ipsos MediaCT, a San Francisco-based market research firm, 82% of consumer stock holdings are held by households that bring home more than $100,000 a year. And the ultra-affluents, the 4% of families that earn more than $250,000 a year, own 61% of all the stocks.

Still, there are those who question the wisdom of focusing on the upper-income earner to the detriment of the middle class. One advisor who left Merrill Lynch last year to join another group argues that exclusively serving the affluent is shortsighted. "I'm still growing my business and it was kind of unacceptable to me because these were still assets, and these clients might start smaller and grow to be much larger clients," he says.

Others question whether the issue needs to be an either/or proposition. "There is nothing wrong with serving the mom-and-pop market," says Chip Roame, managing partner at Tiburon Strategic Advisors in Tiburon, Calif. "I think a bank can develop a product set for such a market regardless of what is happening in other channels."

Other Challenges in the Channel
Going upmarket might sound like good news for advisors, but the reality may be more mixed.

First, you may want to lose the visions of plush offices you may have dancing in your head. Serving today's affluent client does not necessarily translate into a nice fat fee. One recent survey of the affluent and ultra-affluent segment by Ipsos found that when it comes to financial services, people continue to watch the pennies, no matter how rich they are. "There is no denying the central focus on fees and other purely financial considerations among affluents and ultra-affluents alike," writes Stephen Krause, senior vice president and chief insights officer at Ipsos, in a recent blog post.

This may be particularly true for advisors in programs that use a percentage of assets model, according to a report by management consultant Oliver Wyman. "Whereas the traditional model encourages advisors to over-trade a client's account, this new model encourages the opposite. Since reallocating the client's assets represents a cost for the advisor but generates no extra income, advisors have an incentive to do too little-to spend all their time trying to attract new clients and their single-fees and none to managing the accounts of their existing clients."

Technology may also put some advisors' job security at risk. In-person bank transactions are already dropping by 5% a year by some accounts. And with banks under pressure to cut costs, and branch staffing and operating costs amounting to about half the costs of a typical retail bank, it's easy to see why some estimates call for a 50% reduction in the nation's bank branches by 2020.

"In most countries, clients prefer to interact remotely," says Tom Noyes, a Palo Alto venture capitalist and former Global Remote Channels Head for Citigroup's Global Consumer Group. He notes that brokerage staffers hate the idea as it cuts them out of the fees. That's good for bank efficiency, but not for the advisor who would have managed that relationship.

As if to back that up, a 2012 McKinsey Private Banking survey concluded that fewer investors are going to want advice in the coming years. Analysts noted that a recently released Federal Reserve study found that 80% of U.S. families headed by someone 35 years old or younger use the Internet for their financial services. Old wealthy people, McKinsey says, "remain more likely to use advisors than do their children or grandchildren."

Wyman expects a massive reduction in bank personnel, similar to what happened in the travel industry and the decline of the travel agent business. Most banks will pursue a "Volkswagen" offering, Wyman analysts argue-reliable, no-frills service at fairly low cost.

For most advisors, digitalization could be bad news in the long run too., but maybe not right away. McKinsey says that three-quarters of private bank executives say recruiting top relationship-building talent was their top priority in the next two years.

If that's the case, branch-based advisors may feel the brunt of it, as some analysts say the biggest banks are already losing interest in trying to sell financial advice in the branches. "I believe the big banks specifically have back-burnered bank branches as advice givers," says Roame of Tiburon Strategic Advisors.

Tyler Cloherty, an analyst for research firm Cerulli Associates, says his firm sees the emergence of two broad strategies ahead: one based around an office based in a central city that will cater toward more affluent investors, and the other a call-center model on the order of the Merrill Edge platform, and aimed more toward the mass market.

The Bank Advantage
Cerulli predicts that in the short run, bank advisors will just keep up with the other channels in the next two years, hanging on to a steady 5% of assets.

Certainly, investors have priced in some degree of optimism about banks that operate brokerages. Banks with a larger contribution of earnings per share are generally rewarded with higher price-to-earnings multiples, says Elizabeth Bloomer Nesvold, managing partner of Silver Lane Advisors, a New York investment bank specializing in financial service companies.

"In an environment where borrowed money is essentially free everywhere you turn, it's difficult for a bank to avoid becoming a commoditized relationship without some kind of secret sauce to lock in the customer. Investment management is that key," she says.

Financial advice will remain a focus because a combined bank deposit and investment relationship typically contributes five times as much to a bank's revenue than a typical deposit-only customer, according to Noyes.

Indeed, with earnings squeezed by new regulations, the recurring revenue of investment advice may become even more important, adds Nesvold. "The financial advice piece will become increasingly important to generate 'staying power,'" she says. "Banks who don't embrace this may miss the opportunity to participate in one of the most meaningful components of organic growth."

For all but the largest banks, this is likely to mean working with a third-party provider, such as LPL or Raymond James. "The third parties provide investment services to banks and provide a level of income that the banks could never achieve on their own," says Richard Ayotte, president of American Brokerage Consultants in St. Petersburg, Fla.

In fact, in an otherwise flat sector, the third-party providers continue to make strong gains. For instance, thanks in part to the growth of its partnerships with banks and credit unions, Raymond James has $35 billion in assets under management and is adding 15% in assets to its financial institutions programs every year, according to John Houston, senior vice president and managing director of Raymond James Financial Institutions division.

So Who to Trust?
The industry's image problems and trust issues will undoubtedly take their toll on bank channel advisors' prospects as well.

In the 2012 edition of the Edelman Trust Barometer, a survey by the New York public relations giant about attitudes toward financial services, banks rank near the bottom in terms of trust. In fact, commercial banks even rank below the media. The one silver lining, perhaps, is that they aren't quite as unpopular as the financial service sector, which, at 45% approval, stands dead last.

Other surveys confirm the general suspicion toward anyone selling financial advice.

In another 2012 survey, 64% of Americans polled by Wyman told the global management consultancy that they trusted no one but themselves to manage their retirement savings; another 10% didn't even trust themselves. And the news gets worse: Asset managers earned only a 9% approval rating and banks ranked at the very bottom of six possible categories, with 7% approval.

Not surprisingly, many advisors are leaving the channel, says Cloherty. "A lot of advisors are moving to independent business models," he says.

For the Merrill breakaway broker, that means making a bet on a business that is more based on fee for advice than asset management. "I like to think I create a little bit of alpha with my portfolios here and there but investments and funds have been kind of commoditized, so what people are really looking for is the advice," he says.