In census data, a household typically consists of individuals with a shared residence. In financial services, households are groups of related accounts, which may or may not have the same mailing address. They may be a mix of individual accounts, business accounts, and accounts for entities such as trusts or estates.
Financial services companies, especially banks and securities brokerages, are hampered in market research and customer analysis by databases that are organized by account, not by client or client household. The process of associating multiple accounts with an individual or a household is complicated by several factors.
The accounts belonging to a household may have different tax identification numbers (TINs). A person's TIN is a Social Security number, and thus each person in a household (e.g., husband, wife and children) will have a unique TIN. If a household member owns a business, or is the beneficiary of a trust or estate, each of those will have a unique TIN.
Household members may use different surnames. Business, trust and estate accounts will have different names also. A household may use several addresses, such as for a permanent home, a vacation home, a business address or a post office box. Variations in spelling (like the use of initials or abbreviations) across accounts also can complicate systemic grouping of accounts into a household.
Manual intervention by financial advisors and bank branch managers often are needed to group accounts into households. However, the process can be complicated if a household has accounts at multiple branches or offices, served by multiple financial advisors or bank managers who are not aware of the client's dispersal of accounts. If the client household receives discounted fees, enhanced money fund rates and/or special perks based on the size of the total household relationship, this will provide incentive from the client's perspective to have the account data properly grouped into a household, or householded, to use industry jargon.
The definition of a household varies by firm. Developing the logic for grouping accounts into households is a joint effort between marketing and information technology.
