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Nov. 27, 2024 By Dan Geller, Dr. Dan Geller, Behavioral Economics for Financial Services, Analyticom Lake Spur, CA -- An astonishing 764 (14%) community banks and 775 (15%) credit unions vanished in the past 5 years (Q2-2019 to Q2-2024) based on data from the FDIC and NCUA. A total of 1,539 community-based banking institutions disappeared because they ignored a major shift in behavioral finance in the past 5 years. Community banks and credit unions failed to recognize a significant shift from advisory investing to self-investing; much like the shift from using a travel agent to book your trip to doing it directly online. According to Reuters, there are over 100 million self-investing accounts at the 6 largest investment platforms alone. This growing number of self-investing individuals bypass investment advisors and invest directly on the platform. The significant shift from advisory investing to self-investing adversely impacted community banks and credit unions because they are not equipped to provide self-investing services. Conversely, national banks have this capability through their in-house brokerage firm. Case in point is Chase Bank, which offers self-investing services through its J.P. Morgan investing platform. Some community banks and credit unions offer Wealth Management services through their in-house investment advisors, but this initiative is ineffective because self-investors do not use intermediaries, such as investment advisors, and are opposed to paying fees and commissions for something they can do on their own using a scientific and proven model. National banks are using self-investing services to lure deposit money and customers from community-based banking institutions. According to the Federal Reserve, the amount of money sitting in Money Market Funds of brokerage firms have grown from $3.5 trillion in Q2 2019 to over $6.5 trillion today. This amount is likely to increase as more investors are choosing to invest directly and avoid advisory fees and commissions. Recent advancement in behavioral economics and finance opened the door for community banks and credit unions to provide self-investing program. The most significant scientific finding was that the Money Anxiety Index is a reliable predictor of equity performance. The published study demonstrates how anyone can outperform the market scientifically and predictably and with confidence. The findings of this study have been incorporated into the Scientifically Predictable self-investing model, which is now available to customers of community-based banking institutions, who can now outperform the market with confidence and without the need to pay fees or commissions to advisors or intermediaries. Tweet |
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