01.29.20

Capturing a Larger Share of Mass-affluent Clients’ Assets: Evidence from the BISA Research Study

by: Ken Kehrer and Tim Kehrer, Kehrer Bielan Research & Consulting

The recent BISA research study on the Total Return of Investment Services to the Banking Enterprise reconfirms that households that have an investment relationship with their banks or credit unions exhibit greater loyalty to the institutions, use more banking products, and remain customers longer. But do they shift more of their investable assets to where they bank?

At first blush, it appears that they do not. According to the most recent MacroMonitor, the large-scale survey of consumer financial decisions analyzed in the BISA study, the share of assets held at a household’s primary financial institution is not statistically significant between whether they have an investment relationship with the institution or not.

This finding would appear to lend credence to those who perceive that the amount of a household’s assets accessible to a financial institution is a fixed pie, and that if investment services gets a larger slice, there is less left over for deposits, which are more profitable to the bank than an investment services sale. But the BISA study dug deeper into the data, segmenting households by mass market (less than $100,000 in investible assets), mass affluent ($100,000 to $1 million), and affluent households (with over $1 million in investable assets). From this perspective, it is clear that mass-affluent and affluent households that invest where they bank keep much more of their assets there.

While households keep less and less of their assets where they bank as their affluence increases (the blue bars), more-affluent households keep relatively more of their assets where they bank (the difference between the blue and green bars). Mass-market households with bank-originated investments keep 44% of their investable assets at the bank, somewhat less than other mass-market households. While mass-affluent households that invest where they bank have only 32% of their investable assets at their primary bank, that is a 29% larger share than other mass-affluent households. And though affluent households with bank-purchased investments keep slightly less of their assets at their primary bank than mass affluent bank investors, the investment relationship results in a doubling of the share of their wealth held at the bank.

By deconstructing the analysis by the level of affluence, the BISA study reveals that the initial observation was driven by the mass-market segment, which is much larger than the two wealthier segments, so it dominates the calculation of share of assets held at the bank. Having an investment relationship with the bank actually increases the share of assets held at the bank for the coveted more affluent segments.

The study also points out that even for the mass affluent, households that invest where they bank keep more total investable assets there, because they actually have relatively more assets — they are among the more affluent of the mass-market segment.

The BISA study, Smart Investment: Evaluating the Total Return on Investment Services to the Banking Enterprise, utilizes a data-driven approach to understanding the role of investment services in the financial institution’s ecosystem. The study is available only to BISA members.

To learn more about becoming a member of BISA and obtaining the report, contact bisa@BISAnet.org.