The Value of an Investment & Insurance Customer to the Bank January 2012

Kehrer Saltzman Report Series

Strategic Business Insights' Consumer Financial Decisions (CFD) group, in collaboration with Kehrer Saltzman & Associates, is pleased to announce the availability of a series of executive reports that focus on the financial-services industry. The Value of an Investment & Insurance Customer to the Bank is the first report in this series. Read more about the series

About This Report

For many years, bank investment and insurance-services businesses have been challenged to demonstrate their relevance to the overall banking enterprise. The profit contribution of investment services typically accounts for just a few percentage points of the bank's overall bottom line. Because the net income contribution may be marginal, the investment and insurance services are often marginalized, with the result that banks underinvest in this business, constraining its growth.

Recent restrictions on some sources of fee income have focused somewhat more attention on the investment-services business, yet banks continue to look to banking products and services as the source of fees.

Beyond Profit Contribution

Many industry executives have asked for real data that could quantify the importance to the bank of creating an investment or insurance relationship with an existing bank customer. They believe that the strategic value of the investment and insurance business enhances the value of the banking enterprise in ways that overshadow its contribution to fee income and the enterprise's current net income.

That strategic value arises because households that buy investments and insurance where they bank:

  • Are among the bank's most profitable and desirable customers
  • Are more likely to stay with the bank than are customers with just multiple banking relationships.

By underinvesting in their investment and insurance-services businesses, banks are missing the opportunity to increase the stickiness of highly desirable customers. Until now, no source of industry data has existed to test this belief.

The Data Source

The MacroMonitor is the largest comprehensive retail financial-services and marketing database that has measured, analyzed, and interpreted consumer attitudes, behaviors, and motivations continuously since 1978. The 2010–11 MacroMonitor is a national sample survey of 4,374 households, with an oversample of 1,500 affluent households, reweighted to be representative of the US population. The Consumer Financial Decisions group of Strategic Business Insights, formerly part of SRI International, conducts this comprehensive survey every other year.

The Value of an Investment & Insurance Customer to the Bank provides a profile of households that have purchased an investment or insurance product where they bank and of how customer loyalty changes as a household acquires additional banking products or an investment and insurance product. The study also identifies the untapped potential of households that are prone to invest where they bank. This research was conducted by consultants who have a deep understanding of managing an investment and insurance business inside a banking institution and of the information banking executives need to manage up to the overall banking enterprise.

Ken and Chris Kehrer have studied banks as financial-services stores since 1983. Their research has helped financial institutions and their provider partners identify best industry practices and improve performance. Consulting clients include 58 of the 60 largest banks, as well as many other financial-services firms and community banks and credit unions. In 2004, Dr. Ken Kehrer received the prestigious Lifetime Achievement Award from the Bank Insurance and Securities Association for his contributions to the industry. In 2006, the Kehrers sold their firm to LIMRA, creating Kehrer-LIMRA to continue the research program they started almost three decades ago.

Peter Bielan has built successful investment, insurance, and wealth-management businesses inside major financial institutions. Peter and Ken now partner on consulting engagements that combine research about performance improvement with hands-on implementation.


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Table of Contents

The Value of an Investment & Insurance Customer to the Bank 1
Beyond Profit Contribution 1
The Data Source 1
Profile of the Investment Services Customer at a Bank 2
Investable Assets 2
Checking Balances 2
Savings Balances 2
Number of Banking Products 3
Credit and Remote Banking Products 3
Customer Loyalty 4
Missed Opportunity 6
Primary Financial Institution 7
Place for Savings & Investments 8
Trust in Banks 9
The Bank Opportunity in Investment & Insurance Services 10
Appendix A — MacroMonitor Survey Methodology  
Appendix B — Survey Weighting Procedures