Affluent Investors Are Wary of Banks: Cerulli

Affluent U.S. investors, those with more than $250,000 in investable assets, remain confident that their own assets are safe but are wary of the banking segment overall, according to a new study from Cerulli Associates.

Twenty-eight percent of affluent households in the study reported that they use a bank-related platform as their primary financial services provider: Eighteen percent rely on bank advisors, 7% rely on depository programs and 3% work with private banks.

Among households with $100,000 to $250,000 in investable assets, 43% of investors partner with bank providers as their main financial services option. Cerulli noted that these clients’ assets would be fully covered under programs provided by the Federal Deposit Insurance Corp. and the National Credit Union Administration.

However, they are also most likely to have immediate funding needs that comprise a major portion of their liquidity. Thus, diversifying their provider use could be well warranted, especially in periods of banking segment uncertainty.

According to the study, reliance on banking providers trends downward with increasing wealth and is lower among older investors. Overall, bank platform use peaks among those in the 30-to-39 age cohort, with bank advisor use gaining share from bank deposits and direct channels.

After age 40, investors begin moving to advisors they consider more sophisticated and comprehensive in the wirehouse, independent or full-service channels, or as their confidence increases, they take more active roles in their portfolios at direct platform providers.

Cerulli said it behooves banks seeking increased success in the wealth management segment to make retaining these aging, increasingly wealthy clients a crucial strategic priority.

Shaky Confidence

A week after the collapse of Silicon Valley Bank and closure of Signature Bank in early March, Cerulli’s survey partner, MarketCast, polled 1,000 affluent investors to learn of their perception of both the institutions they use and the banking system overall.

Eighty-nine percent of respondents said they were aware of the crisis in the banking sector. In addition, 95% expressed confidence in the disposition of their own assets.

However, only 83% of investors working with private banks felt their assets were secure. Cerulli put this down to their awareness of the legacy of the Boston Private Bank & Trust acquisition by SVB in 2021 and the increased likelihood of highly affluent investors in the channel exceeding the $250,000 FDIC insurance limits.

Respondents were much less positive about the overall outlook on the U.S. banking sector, with just 59% indicating that they were very or somewhat confident in the sector’s stability. Seven in 10 of those working with the wirehouse channel (firms affiliated with some of the world’s biggest banks) and those working with advisors in banks themselves expressed the most confidence in the segment’s solidity.

The survey also asked respondents how their overall confidence had changed during the previous month. Fifty-two percent said their confidence in the banking segment had decreased. Only 17% reported that their confidence had been buoyed by the overall response to the crisis.

Some two-thirds of affluent survey respondents recommended stronger regulation and oversight of the banking system. Cerulli noted that the public’s memory of the pain of these crises generally fades rapidly, and the will of lobbyists surpasses the wisdom of the electorate, resulting in a further loosening of guidelines and inevitable future bank failures.

“With all financial services built on a foundation of trust between clients and providers, maintaining, or in this case rebuilding, a perception of long-term stability is crucial,” Scott Smith, director of advice relationships at Cerulli, said in a statement.

“Recent events in the banking space could be an opportunity for advisors to reassure clients of banking stability and provide an empathetic ear for depository customers’ concerns. This can help advisors retain maturing clients as they accumulate greater wealth.”

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