Gains in revenue and financial adviser productivity have helped credit unions and banks increase sales in their investment programs for the first time in more than a decade.

That's according to the Kehrer Saltzman & Associates' Annual Checkup report, which was sponsored by INVEST Financial Corp., and examines the health of the financial advice business at banks and credit unions.

The percentage of commercial banks offering investment services increased to nearly 27% in 2012, marking the first increase since 2001, the data showed.

The Annual Checkup also showed gains in investment services revenue and adviser productivity, with revenue up 17% at banks and credit unions in 2012, led by banks with their own broker-dealers.

Banks in this category reported revenue up more than 19%, compared to just 8% for the banks and credit unions that partner with third party broker-dealers, Kehrer Saltzman said. The average annual gross production in institutions that work with third-party marketers was up 5.2%, while the productivity gain in banks with in-house broker-dealers was 2.1%.

The research also found that there was a gap between consumer trust in banks and credit unions and their trust in the advisers who work there, said Tim Kehrer, senior research associate at management consultant firm Kehrer Saltzman in Charlotte, N.C.

“Consumers trust banks, and particularly credit unions, far more than they trust competitor providers of financial services, Kehrer noted. “But they do not look as favorably on the advisers they encounter in financial institutions. This gap is particularly wide in credit unions.”

For years, the percentage of all U.S. banks selling investments hovered just under 25%, said Kenneth Kehrer, a principal of Kehrer Saltzman. However, the trend in the prevalence of banks offering investment services reflect the consolidation of the banking industry over this period, he added.

Today, there are 26% fewer U.S. banks than in 2007, Kenneth said. While the number of banks selling investments has shrunk, they are now bigger banks, on average. The 27% of banks selling investments now account for 78% of all bank consumer deposits.

Historically, the number of banks with investment services offerings has been declining since 2007, said Jon Gabriel, a senior associate at Kehrer Saltzman, In 2012, that figure increased by almost 3% to 1,884. Nonetheless, the number of banks that report fee income from investment activity is down 19% from six years ago, he pointed out.

“The results of the study mirror the trends we've been seeing from a broker-dealer perspective,” said Steve Dowden, CEO of broker-dealer INVEST Financial in Tampa, Fla. Adviser productivity increased almost 3% in 2012, which can be credited in part to “banks recognizing the need for broker-dealer support to streamline back office operations.

Some of the warning signs from the Annual Checkup included a continued thinning out of the adviser sales force relative to the institution's opportunity and a lack of progress in becoming the customer's trusted financial adviser.

“Banks that outsource their broker-dealer had one adviser for every $320 million in consumer deposits,” Kehrer said. “That figure represents less than half the coverage ratio that Kehrer Saltzman research has found to be best industry practice.”

Kehrer said the typical bank needs to more than double the number of advisers it deploys in order to fully take advantage of the opportunity present in its customer base.

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Credit Union, Bank Investment Services Up for First Time in 10 Years

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