OREANDA-NEWS. December 07, 2015. There’s not only a disparity in assets under management between affluent Americans and middle-class Americans – there’s a disparity in investment allocations of various risk profiles between and among financial asset tiers, too.

That’s the takeaway from the recently released Equifax Observations and Impacts of U.S. Consumer Wealth Trends report from the IXI Services division of Equifax. In the report, company experts say there is opportunity in better understanding financial consumer risk levels among the various wealth segments, and leveraging those risk profiles to attract more revenues.

The report reveals a significant disparity between (and among) the investment allocations of various credit risk profiles of Affluent, Mass Affluent, and Mass Market Americans, and shows how those profiles shape consumer financial habits with their current financial institutions.

Risk Band Expanded

Generally, the more financial assets consumers own, the more risk they are willing to take with their investment portfolios.  That is consistent with the report’s findings, as Affluent households have the highest percent of assets in investments, Mass Market households have the highest percent of assets in deposits, and Mass Affluent households are in the middle.

This holds true even when comparing credit risk band groups (e.g. Aggregated FICO® Scores bands under 650, 650-750, and 750+) across asset tiers.  For example, Affluent households in the lowest credit risk band (under 650) still have a higher allocation of their assets in investments (e.g. stocks, mutual funds, bonds, annuities) when compared with Mass Affluent households in the highest credit risk band (over 750) which also have a higher percent in investments but lean slightly more toward deposits than does the low-credit-risk-band Affluent group.

However, looking within each asset tier reveals some significant variations in portfolio allocations depending on the credit risk band:

  • Affluent households tend to have a fairly constant allocation of investment types regardless of credit risk band.
  • Mass Affluent households within the highest credit risk band (750+) are a bit more risk tolerant, with a higher percentage of their assets in stocks and mutual funds, than Mass Affluent households within the lowest credit risk band (under 650).
  • Mass Market consumers show the most variation by credit risk band when it comes to portfolio asset selection. Mass Market households within the higher credit risk band (750+) are much more likely to hold more of their small portfolios in mutual funds and other investments, shifting away from deposits, as compared to Mass Market households within the lower credit band (under 650).

For financial advisors, knowing how credit risk scores affect investment preferences can help shape products, services and policies that can keep current customers, while attracting new ones from financial institutions who don’t use credit risk model data to shape their own customer programs.