Credit unions are dominating the growth in investment servicesrevenue among financial institutions, according to according toKehrer Bielan Research & Consulting's “Annual Industry Checkup:2014/2015,” and financial advisors at credit unions face especiallybright futures.

The investment services market is a lucrative one, according tothe report. About 13% of American households own an investmentbought at their primary bank or credit union, it found, and theytend to have larger checking and savings balances.

But the number of banks offering investment services fell forthe fifth time in the last six years, sliding from 2,042 in 2008 to1,772 in 2014. From 2013 to 2014 alone, the number dropped about2%. Because the total number of banks shrank at a faster rate,however, the percentage of banks selling investments actually rose0.7 points, from 26.2% to 26.9%, the report said.

In contrast, about 15.1% of credit unions offered investmentservices in 2014, up a full two percentage points from2013. The number of credit unions offering investment servicesrose 6.4% during that short time, going from 904 to 961, accordingto the study.

Combined, banks and credit unions saw investment servicesrevenue rise 6% in 2014 — a rate the report said is “well below thetypical host institution's expectations. But parse out thedata, and credit unions' heft becomes clear. In 2014, they posted7.9% year-over-year growth in investment services revenue, comparedto 6.6% for banks with third-party broker dealers (BDs) and 5.8%for banks with in-house BDs. Of the 2,043 banks and 961 creditunions Kehrer Bielan estimated offered investment services, all but40 retail banks used third-party broker dealers.

However, the growth in revenue from investment services forfinancial institutions that use third-party BDs was not driven byadvisor productivity, which rose just 1.2% for the year, accordingto the study. Given that part of that small gain was inflatedby big increases in the value of the assets under management, “wemay be reaching a limit on how far productivity growth will takeus,” study co-author Peter Bielan added.

Rather, the real catalyst behind the growth in revenue frominvestment services, according to the report, was a rise in advisorheadcount. Financial institutions using third-party BDs saw a 5.7%rise in the number of advisors in 2014, though the number ofadvisors working in bank BDs fell 3.2% and average revenue for alladvisors rose less than 8% in 2014, according to the report.

Of course, 5.7% is nowhere near the headcount growth rate thestudy said is necessary to meet the vast demand for advisors today.“Our research indicates that the typical bank or credit unionshould increase its advisor headcount by 70% in order to meet theneed of its customers,” said study co-author and Kehrer Bielan Dr.Kenneth Kehrer.

The report, sponsored by INVEST Financial Corporation, which isa subsidiary of Florida-based broker dealer network NationalPlanning Holdings, is a compilation of data from other KehrerBielan surveys and reports, as well as FDIC all reports and BISAreports.