03.10.20
Markets Up, Investment Services Revenue Down, Study Highlights Need To Hire Financial Advisors in Financial Institutions
by: Connie Gregory, Cetera Financial Institutions, and Tim Kehrer, Kehrer Bielan Research & Consulting
The markets were booming in 2019, but the investment services units in banks and credit unions were left out of the party. This year’s annual industry checkup found that revenue was down 1.3%, and advisor revenue productivity was up a disappointing 0.8%. The small lift in productivity was largely due to a 2% decline in advisor headcount. Average productivity was up because the number of advisors fell more than revenue.
Even the one bright spot — investment assets under administration were up 14.2% — was a hollow achievement, because the assets on the books at the beginning of 2019 experienced large gains in market valuation. For example, the S&P 500 Index was up 30% during the year.
This suggests that the amount of new investment assets acquired by financial institutions was swamped by asset attrition.
But the arc of the data indicates that the business performance of investment services in banks and credit unions lagged the markets, and the first quarters of 2020 should exhibit strong revenue growth. Because fees on advisory assets are paid in arrears, the sharp market decline in the fourth quarter of 2018 did not impact investment services revenue until the first quarter of 2019. As the markets recovered and blossomed, fees on advisory assets followed suit, but with a lag. The cratering of revenue in the first quarter created such a deep hole that financial institutions never quite climbed out of it by the end of the year. But early 2020 should provide a different story. As Brooklyn Dodgers fans used to say, “Wait ‘til next year.”
Since 2012, Kehrer Bielan has combined proprietary and industry data to provide an annual review of the health of the investment services industry in banks and credit unions. The data for the 2019/2020 Annual Industry Checkup cover 2,202 of the banks and credit unions that provide investment services, which collectively manage 12,954 advisors. This year’s Checkup is sponsored by Cetera Financial Institutions.
Download your copy of the 31TUAnnual Industry Checkup.
About Cetera Financial Group®
Cetera Financial Group (Cetera) is a leading financial advice firm. It empowers the delivery of an Advice-Centric Experience® to individuals, families and businesses across the country through independent financial advisors as well as trusted tax professionals and banks and credit unions.
Comprehensive services include wealth management solutions, retirement plan solutions, advisory services, practice management support, innovative technology, marketing guidance, regulatory support, and market research.
Cetera Financial Group” refers to the network of independent retail firms encompassing, among others, Cetera Advisors LLC, Cetera Advisor Networks LLC, Cetera Investment Services LLC (marketed as Cetera Financial Institutions or Cetera Investors), Cetera Financial Specialists LLC, and First Allied Securities, Inc. All firms are members FINRA / SIPC.