While consolidation within any industry tends to mean the elimination of staff and departments, for credit union investment programs the effect has been just the opposite.In 2008, credit unions generated $10.7 billion in noninterest income with brokerage, investments and insurance comprising 10.3% of the pie, according to Callahan & Associates. On average, noninterest income accounted for 1.43% of the industry's assets. Contributing to the growth is the net number of credit unions providing retail investment services, which increased from 938 in 2005 to 968 in 2008 based on data collected from the Retail Investment Services Study, a joint research venture from Callahan and Snyder Consulting Solutions LLC."As the number of credit unions reduces due to consolidation, the growth does include a certain number of program reductions or eliminations as the result of mergers," said Pete Snyder, president of Snyder Consulting Solutions. "What we found is that credit unions are absolutely recognizing that their investment programs were very underrepresented and needed to grow."One way to cultivate noninterest income is through the expansion of the sales staff, Snyder said. The number of registered reps grew from 1,902 in 2005 to 3,051 last year. Adding more staff support appears to be paying off. Total gross dealer concessions generated in 2005 was $289 million and by year-end 2008, that number grew to $352.2 million. More staff meant a bump in the aggregate value of member investment accounts, which slightly increased from $38.9 billion for the same time period to $40.1 billion last year. Snyder said that small raise is significant given the turmoil that roiled the markets last year.Still, the total number of member accounts has fluctuated significantly. They reached their peak at the end of the first quarter of 2007 with 1.32 million accounts. However, by year-end 2007, the number of accounts had dropped to 1.17 million. Based on feedback from broker-dealers participating in the Callahan/SCS retail investment services study, the reduction came from members liquidating funds for use or rebalancing portfolios, which included at least some account consolidation. But there is a silver lining."This is positive news for the credit union channel as other brokerage firms saw a reduction in the account relationships largely due to customers moving their accounts to other firms," Snyder pointed out.The record number of deposit growth in the industry has also helped fuel investment programs, said Lydia Cole, an industry analyst with Callahan. Members seeking safety and soundness are turning to credit unions, which had led to some restarting and retooling their offerings. Many have taken steps to help members weather the economic downturn, she added. Updating their Web sites and hosting more seminars are the top ways credit unions have assisted followed by an increase in direct mail pieces and calls to members.For credit unions to maintain their revenue gains, Snyder said it is critical that they be open to a change in the product mix. In 2007, fixed annuity sales made up 97.1% of investments. That percentage nosedived to 11% in 2008. Mutual funds and variable annuities used to be 66% of revenue but were 53% last year. Recurring revenue such as fee-based and advisory accounts shifted slightly from 24% to 29%."The reps in the management of these programs continued to market and didn't make any adjustments," Snyder said. "Credit unions were very proactive in making the adjustments to capture more [member] wallet share."Looking ahead, credit unions should also consider taking another look at how many reps are in their programs, the branch to depth ratio and whether their referral system is strongly supported. Promoting an integrated and team-focused environment ties it all together."Credit unions have gone through challenging times," Snyder said. "A good trend is in 2007, net income was 12.68%. It has dropped to 10.61%, which is a very small drop [given return on assets are in the negative range]. Because they hired more financial consultants and expanded service and support staff, they were able to generate more business even in an economic downturn."One area that doesn't get the spotlight like retail investments is loan protection products, Snyder said. The channel includes credit insurance or debt protection coverage, mechanical breakdown insurance and guaranteed auto protection. That could change given their net income margin potential and members having more ties to some sort of loan. Callahan and SCS are in the early stages of putting together a benchmark study on LPPs scheduled for release in 2010. Gateway Services Group and Securian Insurance are set to sponsor the report, which aims to include data from 500 credit unions."[LPPs] don't get the awareness like investments. As a result, the penetration rate is still relatively low," Snyder said.–[email protected]