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

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

But the number of banks offering investment services fell for the fifth time in the last six years, sliding from 2,042 in 2008 to 1,772 in 2014. From 2013 to 2014 alone, the number dropped about 2%. Because the total number of banks shrank at a faster rate, however, the percentage of banks selling investments actually rose 0.7 points, from 26.2% to 26.9%, the report said.

In contrast, about 15.1% of credit unions offered investment services in 2014, up a full two percentage points from 2013. The number of credit unions offering investment services rose 6.4% during that short time, going from 904 to 961, according to the study.

Combined, banks and credit unions saw investment services revenue rise 6% in 2014 — a rate the report said is “well below the typical host institution's expectations. But parse out the data, and credit unions' heft becomes clear. In 2014, they posted 7.9% year-over-year growth in investment services revenue, compared to 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 credit unions Kehrer Bielan estimated offered investment services, all but 40 retail banks used third-party broker dealers.

However, the growth in revenue from investment services for financial institutions that use third-party BDs was not driven by advisor productivity, which rose just 1.2% for the year, according to the study. Given that part of that small gain was inflated by big increases in the value of the assets under management, “we may be reaching a limit on how far productivity growth will take us,” study co-author Peter Bielan added. 

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

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

The report, sponsored by INVEST Financial Corporation, which is a subsidiary of Florida-based broker dealer network National Planning Holdings, is a compilation of data from other Kehrer Bielan surveys and reports, as well as FDIC all reports and BISA reports.