Comparative Financial Portfolios of Bank and Nonbank Customers: Evidence from the Survey of Consumer Finances

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Comparative Financial Portfolios of Bank and Nonbank Customers: Evidence from the Survey of Consumer Finances

An already competitive financial environment is likely to become even more competitive in the future as commercial banks, thrifts, and credit unions (CUs) attempt to gain market share in currently available markets and seek to increase the range of products offered. Thrifts, for example, are still working to develop a significant presence in non-mortgage lending, despite increased powers to do so since the early part of the decade. Credit unions are increasingly active in the credit card market. High on many banks' lists of desired additional products are mutual funds, full-service brokerage, and insurance.

As competition for retail customers intensifies, understanding the existing asset and liability holdings of consumers is important. Individual institutions with the requisite financial strength will need strategies not only to attract new customers but also to retain existing ones and to provide a competitive variety of services. As depositories plan for the future, the starting point must be an understanding of the financial holdings of current customers, especially those who already consider the institution their primary financial institution.


The purpose of this paper is to examine portfolios of asset and liability holdings of customers of several categories of financial institutions. The research compares the financial positions of households choosing different types of relationships with depository institutions. The first set of analyses seeks to identify portfolio characteristics that distinguish households choosing commercial banks as their primary financial institution from those choosing thrifts or credit unions as their primary institutions. For these purposes, "primary" institution is defined as the one at which an individual or household holds the main checking account. A second set of analyses compares assets and liabilities of respondents holding no transactions accounts with those with a checking account at any type of depository. The objective of the latter analysis is to determine how households in the market untapped by depositories differ from depository users.

The results of the analyses are intended to provide answers to questions such as: Are commercial bank customers significantly more likely to have bond and stock holdings than thrift or credit union customers? Or do they favor indirect investments, such as mutual funds? Which customers are more likely to have brokerage accounts, insurance policies, and so forth? What portfolio of assets and liabilities best characterizes primary users of one depository versus those using another? How do the portfolios of depository users differ from those of non-users?

The answers to these questions are important because product development strategies in most institutions are affected by existing customer preferences and attitudes, as are promotion, advertising, and pricing decisions. Further, information about the preferences of competitors' customers is useful in developing strategic plans. Knowledge of which investments seem to attract which types of customers may help financial institutions make better marketing decisions in the current operating environment with its emphasis on control of non-interest expenses.


The data base used to develop the profiles of financial holdings of depository institution customers is the 1983 Survey of Consumer Finances (SCF), a data base collected by the Federal Reserve and six other federal agencies. Conducted by the Survey Research Center of the University of Michigan from February through July, 1983, the SCF collected detailed data on assets, liabilities, income, and financial institution relationships from over 4,000 households. The survey also asked respondents for their attitudes toward risk, liquidity, use of credit, and other financial issues. …


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