More mergers and more education and awareness were among the top factors that have impacted member use of investment services and products at credit unions in 2009.

The 2010 “Credit Union Retail Investment Study” discovered this trend after tracking data provided by broker-dealers from 943 credit union clients. The study was published Sept. 1 by Callahan and Associates and Snyder Consulting Solutions. The data is grouped into four sections: a global view of the credit union retail investment space, individual credit union data, case studies and a benchmark scorecard.

Since 2005, the number of credit unions with retail investment services programs, as a percentage of the total number of credit unions in the United States, has increased steadily each year from 10.6% to 12.2% by year-end 2009, according to the report. While approximately 12.2% of all credit unions as of year-end 2009 had investment programs in place, the likelihood of having a program in place is related to the size of the credit union.

Even as the financial markets started to crumble in late 2007 and into 2009, credit unions maintained a strong footing, said Pete Snyder, president of SCS in Roseville, Calif. Consumers became concerned with safety and soundness as financial services providers posted significant losses and a number of high profile financial firms were bought, restructured, bailed out by the government or failed, the report noted.

As a result, many firms that were focused on the delivery of retail brokerage and insurance services experienced drops in revenue that required an immediate adjustment to their overall operating models, including layoffs of back office personnel and involuntary sales force reductions based on recalibrated minimum levels of individual production.

“Meanwhile, in the credit union channel, the indicators were very good that the percentage of credit unions offering investment services increased somewhat following mergers but also through program expansion and awareness,” Snyder said.

The total number of credit unions decreased from 8,880 to 7,710 between 2005 and year-end 2009 as the result of mergers, while the number of credit unions offering investment services between 2005 and year-end 2009 increased slightly from 938 to 943, the data showed. With the merger activity that has occurred since 2005 a number of investment programs were also merged.

Last year, a decline in registered representatives triggered a slight decline in gross revenues. Snyder said the reduction in sales force was driven by many of the smaller credit unions that opted to share a representative with their peers rather than have a dedicated one.

Indeed, between 2005 and 2008 the number of registered representatives per credit union increased slightly from 2.0 to 2.4. By year-end 2009 that number dropped to 2.1 representatives per credit union, according to the benchmark study. Given the relationship between the total number of representatives that are in place in any investment program and the revenues that each can generate, there was a corresponding reduction of 6.7% in gross revenues during 2009.

For many members and consumers, a flight to safety with their investments became the norm after the markets buckled. Credit unions saw a surge in deposit growth as assets under management for retail investments trailed behind. That pattern can be seen with fixed annuity sales, which increased over the past three years and now represent 21.3% of total revenues to credit union retail investment programs as of year-end 2009. This is up from 6% in 2007 and 11.8% in 2008.

The study found that in contrast, the revenue from both mutual fund and variable annuity sales have decreased during the same reporting period. By year-end 2009, mutual fund sales represented 18.0% of revenue, down significantly from the 24.1% in 2007. The variable annuity share of revenue in 2007 stood at 42.2%. A year later the total revenue from this product declined to 34.6% and at year-end 2009 it declined further to 31.8%.

“It’s another factor we saw loud and clear, which was a shift in revenue during a migration from risk to safety,” Snyder said. “Typically, when the markets come back, things swing back and forth. You can see that in fixed annuities. It shows that the reps can adapt and help members.”

–msamaad@cutimes.com