Bank-Oriented Core Customers: Can Banks Keep Them and Gain More? MacroMonitor Marketing Report Vol. VIII, No. 5 October 2008

Banks have regained their stature as the most prominent financial institution among the Affluent-households with a households income of $100,000 or more or total assets excluding the value of the primary home of $500,000 or more. In 2006, fully one-third of Affluent households entrust the greatest percentage of their savings and investment dollars to depository institutions (banks, savings banks/savings and loans, and credit unions)-the same proportion as in 1996. During the "irrational exuberance" of the late 1990s through 2000, banks were briefly displaced by brokerage firms as the most prominent type of financial institution when many households shifted the majority of their financial assets to brokerages.

Figure: Where Affluent Households Keep Most of Their Financial Assets

This report profiles Bank-oriented Core Customers-Affluent households that keep the bulk of their savings and investments in depository institutions-and analyzes their financial needs and behaviors.

  • Bank-oriented customers are significantly more risk averse than the average Affluent household. They are less likely than the average Affluent household to invest in the stock market or to consider themselves sophisticated investors.
  • Bank-oriented customers have lower asset balances and higher debt levels than Affluent households overall.
  • The average primary head of Bank-oriented households is significantly younger than the average primary head of all Affluent households, and Bank-oriented households are more likely than Affluent households overall to support young children.
  • Although Affluent households overall are shifting away from needing face-to-face interactions with financial-institution personnel and increasingly prefer the Internet as a delivery channel, Bank-oriented customers are lagging behind in this regard.
  • Given their youth and the time necessary to raise children, Bank-oriented customers likely spend less time than Affluent households overall spend in making financial decisions.

The MacroMonitor data show that banks have been successful in attracting a large segment of the Affluent market-in particular, those households that are more interested in keeping their investments fairly static rather than taking a chance at aggressively growing them. But most banks do not want to be simply a conservative institution. They want also to provide high-risk, high-yield opportunities. Banks have the potential to succeed in presenting this dual image by focusing attention on the up-and-coming Affluent generation: the Bank-oriented Core Customers. Convenience, simplicity, and personal service will be the keys in banks' holding and growing this market, given its profile and financial behaviors.