Is senior management giving the wealth management business short shrift at your bank or credit union? Present them with this simple fact: clients that purchased an investment from their financial institution will keep their deposit and credit products longer.
In a new study released this week, Kehrer Bielan Research & Consulting confirmed earlier findings that establishing an investment relationship with an existing banking client dramatically increases client loyalty. According to the research, almost half of the U.S. households that have purchased an investment at their primary bank or credit union say they would not switch to another financial institution, while only about one in four households overall say they would not jump ship.
They are also 45% more likely to say that banks and credit unions are the best source for advice about saving and investing and 6% more likely to recommend their institution, the research found.
"Financial institutions are still the most trusted financial services providers, by far, but they have fallen short on leveraging that trust into becoming the primary provider of a client's overall financial services need," Kenneth Kehrer, a co-author of the study, said in a press release announcing the new research.
According to the report, households that own an investment through their primary bank or credit union are among the most profitable for the banking enterprise. Those households have 38% greater checking account balances and 140% greater savings deposits than households that don't own bank-bought investments. They are also much more likely to use "every kind of credit product offered," including credit cards, first and second mortgages, and vehicle loans and leases. In addition, they are much more likely to own an asset management or advisory account and three times more likely to have purchased that account where they bank.
"Historically, banks and credit unions have not considered their investment program part of their core business. This study actually shows that making their investment program a bigger priority will generate growth in loans and deposits," said Andy Kalbaugh, managing director of LPL Financial Institution Services, a third-party investment, advisory and wealth management services provider to more than 740 banks and credit unions nationwide.
Notably, households that invest where they bank are more upscale than originally thought, according to the findings. Almost one in four (39%) of households that own an investment purchased at their primary financial institution are mass affluent with assets between $100,000 and $ 1million, and more than 10% have assets greater than $1 million.
The study, titled "The Value of an Investment Client to a Bank or Credit Union," updates a previous study in 2012 by analyzing the latest consumer data from the most recent MacroMonitor survey of 4,261 U.S. households. It is sponsored by LPL Financial and co-sponsored by AIG Retirement Services, Northstar Asset Management Group and Voya Financial.
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