Bankers looking to wring the most money out of existing customers might thinking about selling them some insurance.
Indeed, a new study showed that banks and credit unions are missing a yawning opportunity to generate revenue by expanding wealth management services that include the sales of insurance and investment products. The research, which looked at 4,354 households, was conducted by Strategic Business Insights and commissioned by
LPL Financial LLC,
Prudential Financial Inc. and Western National Life Insurance Co.
The study found that customers who invest and buy insurance at their banks typically have higher levels of total household financial assets, with an average of $348,000 in investible assets. Those who don't buy those products where they bank only have $189,000 in investible assets.
Savings and checking account balances also tend to be higher for customers who buy insurance and investments at their banks. Balances in checking accounts are 16% higher for clients who have bought products at their banks, compared with those who don't. Clients who use brokerage services at their banks also have savings account balances that are 85% higher than those of nonbrokerage banking customers.
The study noted that banks typically concentrate their sales efforts on banking products while ignoring insurance and investment products.
Certainly, the numbers seem to bear this out. Fully 92.3% of U.S. households consider a bank or a credit union to be their primary financial institution. But banks have sold insurance or brokerage products to only 12% of those clients. And consider this: Three out of four heads of U.S. households say they
trust banks and credit unions.
The results were slightly different for other financial institutions. Only 15% of the respondents said they trusted insurers. Only 9% said they trusted
financial planning companies, while only 7% had faith in full-service brokerages.
Andy Kalbaugh, managing director and president of LPL's institution services division, said banks and credit unions would do well to stress to depositors that not only can they purchase insurance and investment products — but they can receive planning services too. LPL, for instance, has about 670 relationships with banks and credit unions, he said.
“People say that if you sell more products to your client, you'll have a stickier relationship,” Mr. Kalbaugh said. “But it's not just more products. With investments and insurance, the relationship becomes more robust and there's an opportunity to drive financial advice.”
