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January 28, 2015 at 09:52 AM
Investors who purchase investment products through their bank or credit union keep those products longer, a study released Tuesday by LPL Financial and Kehrer Bielan Research & Consulting found.
“Historically, banks and credit unions have not considered their investment program part of their core business,” Andy Kalbaugh, managing director of LPL Financial Institution Services, said in a statement. “This study actually shows that making their investment program a bigger priority will generate growth in loans and deposits.”
Consumers overwhelmingly prefer banks and credit unions to other providers like full-service brokerage firms, online direct brokerages, and insurance and investment companies. Nine out of 10 said a bank or credit union is their primary financial services firm.
However, the number of bank customers who purchase investments through their bank or credit union is low — just 13%. They tend to be sophisticated, though. Almost 40% of those households have between $100,000 and $1 million in assets. More than 10% have over $1 million.
In addition to owning investments they purchased through their bank for longer, those customers also keep more of their money in the bank. The report found their checking account balances are 38% higher than other customers, and their savings accounts are 140% higher. They are also “much more likely” to use every kind of credit offered through the bank.
The report noted, though, that although those customers have higher average balances than their peers, not all of those assets are held at the same bank they have their investments with. “The data nonetheless demonstrates that investment clients have a greater propensity to maintain large account balances in products that are highly profitable for the institution, making them very attractive clients,” the report 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,” Dr. Kenneth Kehrer, co-author of the study, said in a statement.
