Insights | 09.21.20
How Many of the Bank’s Customers Are Viable Investment Clients?
In the recent joint BISA-Kehrer Bielan webcast on The Advisor of the Future, Peter Bielan presented an analysis of how relying on referrals from the bank to penetrate the bank’s customer base of viable investor households would take 13 to 25 years to sit down with all of them, let alone enlisting them as investment clients. The analysis assumed that 20% of the typical bank’s customer base are viable investor clients.
Since the webcast, we have received several questions about that 20% assumption. How many of the typical bank’s customer households are viable investor clients.
We last tackled this question in Gender Dynamics in Retirement Investor Households, a study last year sponsored by Global Atlantic. For that study, we wanted to focus on the U.S. households that financial advisors would like to have as clients for investing in retirement products such as annuities. We set a threshold of at least $150,000 in financial assets and included all such households who are probably saving or investing for retirement, or already retired.
Based on this definition, in 2016 there were 31.5 million of those households — or 23% of all U.S. households — and they owned $29 trillion in financial assets, 78% of the household financial assets in the U.S. So if your bank’s customer base is similar to the U.S. population, 23% of households might be expected to be Retirement Investment Clients.
As we build on our analysis of the penetration of Viable Investor Households, we should consider whether we need to refine these definitions further. One issue is whether to base the definition of assets on “financial” assets or “investable” assets. The latter excludes 401ks and other defined contribution plans. The money in these qualified plans is not generally available to the advisor to manage, but is a potential source of rollover business.
Another issue is whether the threshold of $150,000 in assets is too low. What is it in your firm?