Bank Brokerages with Self-Directed Investing Channel Earn Higher Profits, Survey Reveals

Jersey city, NJ - 17 April 2012

Scivantage and Kehrer-LIMRA partner to identify trends driving growth within the online investment channel of banks

Scivantage®, an independent financial technology provider with proven expertise in online brokerage, tax and portfolio reporting, and wealth management applications, in partnership with Kehrer-LIMRA, a subsidiary of LIMRA and a provider of research and consulting for banks, announced today results of a survey of the bank brokerage industry. According to the findings, bank brokerage firms that provide customers with an online investing option contribute 13% more profit to the retail bank than those that have no self-directed investment channel.

Revenue generated per household was 16% higher in the accounts at banks that provided an online brokerage, and the revenues generated per million dollars of core retail deposits were 33% higher than their peers that did not offer online investment services.

“With increased competition from traditional and online brokerage firms, banks are being challenged to retain and grow their existing client relationships,” said Joe Stensland, Senior Vice President, Managing Director of Wealth Management Solutions, Scivantage. “As investors continue to demand higher levels of service and greater access to the latest technologies to manage their investments, banks must reevaluate their online investment offering in order to capture a greater share of assets.”

“The self-directed investment channel is an important, and often overlooked, component of a profitable bank brokerage business strategy,” said Scott Stathis, Managing Director and COO, Kehrer-LIMRA. “The average revenue generated from each online trading account can be significant considering the fact that these accounts are self-directed, require little service, and are a low cost delivery channel for the bank.”

Of the banks that were queried in the survey, 77% already offered online brokerage services, 4% were in the planning stages and 19% had no current plans to offer online brokerage.

Additional key findings include:

  • 83% of banks claim that online brokerage is important to their client segmentation strategy and 67% of banks claim they realize online brokerage is an important component of their client acquisition strategy.
  • The average age of an online brokerage client was 49, which is right in the sweet spot of prime earning years and just shy of the period of peak investible assets.
  • Among the banks that offered online brokerage, the targeted client segments were primarily high net worth, affluent and emerging affluent, secondarily the mass market and finally, about 40% of the banks said they also targeted the lower income markets.
  • The most prevalent online offerings were account access and trading, followed by research and real-time market data, consolidated statements, document delivery and storage.

The study also showed that online investment offerings will help banks attract and retain the Generation Y and Generation X segments, both strategically critical age demographics that will benefit from the wealth transfer of older generations. Investors in the younger demographics tend to conduct their lives with a distinct online focus and the ability to nurture this segment of the population is critical for banks if they hope to maintain or grow market share in the future.

The Value of the Self-Directed Investing Channel in the Bank Brokerage Industry whitepaper is a study of 26 institutions, most of which are in the nation’s top 50 banks, representing more than 30% of total investment sales.

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