CHARLOTTE, N.C.--(BUSINESS WIRE)--Headline of release should read: Percentage of Banks Selling Investments Increases for First Time in Over a Decade (sted Percentage of Banks Selling Investments Increases for First Time in 12 Years)
The corrected release reads:
PERCENTAGE OF BANKS SELLING INVESTMENTS INCREASES FOR FIRST TIME IN OVER A DECADE
Kehrer Saltzman’s Annual Checkup Examines State of Investment Services in Financial Institutions
The percentage of commercial banks offering investment services increased to nearly 27 percent in 2012, marking the first increase since 2001, according to a report released today by Kehrer Saltzman & Associates, and sponsored by INVEST Financial Corporation. Kehrer Saltzman publishes its Annual Checkup to examine the health of the financial advice business in banks and credit unions.
“For years, the percentage of all US banks selling investments hovered just under 25 percent,” said Dr. Kenneth Kehrer, a principal of Kehrer Saltzman. “But the trend in the prevalence of banks offering investment services reflects the consolidation of the banking industry over this period. Today there are 26 percent fewer US banks than in 2007; while the number of banks selling investments has shrunk, they are now bigger banks, on average. The 27 percent of banks selling investments now account for 78 percent of all bank consumer deposits.”
The Annual Checkup report provides an update on the state of the investment services business in banks and credit unions. The Annual Checkup draws on the firm’s Annual TPM Survey, other industry data, and the firm’s proprietary consumer research.
“Historically, the number of banks with investment services offerings has been declining since 2007,” observed Jon Gabriel, a senior associate at Kehrer Saltzman, “but last year it increased by almost 3 percent to 1,884. Nonetheless, the number of banks that report fee income from investment activity is down 19 percent from six years ago.”
The Annual Checkup also showed gains in investment services revenue and advisor productivity, with revenue up 17 percent in banks and credit unions in 2012, led by banks with their own broker-dealers. Banks in this category reported revenue up more than 19 percent, compared to just 8 percent for the banks and credit unions that partner with third party broker-dealers. The average annual gross production in institutions that work with Third Party Marketers (TPMs) was up 5.2 percent, while the productivity gain in banks with in-house broker dealers was only 2.1 percent.
“The results of the study mirror the trends we’ve been seeing from a broker-dealer perspective,” said Steve Dowden, chief executive officer of INVEST, which sponsored the study. “Advisor productivity increased almost 3 percent in 2012, which can be credited in part to banks recognizing the need for broker-dealer support to streamline back office operations.”
Warning signs from the Annual Checkup included a continued thinning out of the advisor sales force relative to the institution’s opportunity and a lack of progress in becoming the customer’s trusted financial advisor.
“Banks that outsource their broker-dealer had one advisor for every $320 million in consumer deposits,” Dr. Kehrer said. “That figure represents less than half the coverage ratio that Kehrer Saltzman research has found to be best industry practice. The typical bank needs to more than double the number of advisors it deploys in order to fully take advantage of the opportunity present in its customer base.”
“Our firm’s proprietary consumer research also finds that there is a gap between consumer trust in banks and credit unions and their trust in the Advisors who work there,” noted Tim Kehrer, senior research associate at Kehrer Saltzman. “Consumers trust banks, and particularly credit unions, far more than they trust competitor providers of financial services. But they do not look as favorably on the advisors they encounter in financial institutions. This gap is particularly wide in credit unions.”
About Kehrer Saltzman & Associates: Kehrer Saltzman & Associates is a strategic management consulting firm that provides the financial advice industry with insights based on a melding of research and experience in managing the delivery of investment, insurance and wealth management. For more information, visit www.KehrerSaltzman.com or email firstname.lastname@example.org.
About INVEST Financial Corporation: INVEST Financial Corporation (www.investfinancial.com), a subsidiary of the National Planning Holdings, Inc.® (NPH®) independent broker-dealer network, is a full-service broker-dealer based in Tampa, Fla. NPH is an affiliate of Jackson National Life Insurance Company® (Jackson®, www.jackson.com), a leading provider of retirement solutions. INVEST Financial Corporation, member FINRA, SIPC, a Registered Broker-Dealer and Registered Investment Advisor, and its affiliated insurance agencies offer securities, advisory services, and certain insurance products. Products are: Not FDIC or NCUA insured; Not deposits of, obligations of, or guaranteed by any bank or credit union; Subject to investment risk, including the possible loss of principal amount invested. INVEST and Kehrer Saltzman are unaffiliated companies.