Bank brokerage revenue declined 14% last year in relative terms across banks of all sizes, according to new data from Kehrer-LIMRA.
Individual advisor production dropped by a corresponding amount, 16%, from an average monthly gross of $29,249 in 2008 to $24,427 last year. Average monthly production per platform rep fell from $1,042 in 2008 to $820 last year.
“It’s a big drop, especially since the last quarter of 2008 was down too,” said Ken Kehrer, the research director at Kehrer-LIMRA. “The disappointing part was that it looked like it was coming back, but then we had that terrible November. Now we’re going into a new year, it’s unclear whether there’s a recovery or not.”
Part of the decline in bank brokerage revenue is due to an overall devaluation of assets under management—recurring revenue held steady at between 16% and 18% of average product mix—which generated lower fees as a result.
Fixed annuity sales, which enjoyed an upswing as the market waned, started a slow, steady slide last year as the market rallied and competition from CDs increased. Fixed annuities accounted for a high of 44% of average product mix in the first quarter of 2009, while variable annuities languished at a low of 12% of average product mix.
By the fourth quarter of last year, fixed annuities had slumped to 28% of average product mix at bank brokerage programs, while variable annuities rose to 17% of product mix. Mutual funds, which also got hammered at the beginning last year, when they represented just 7% of product mix, gained ground by the end of the year at 13% of product mix, standing shoulder to shoulder with sales of general securities.
Life insurance, historically at the bottom rung of brokerage sales, ended the year at 5.2% of average product mix, up from 4.2% at the start of last year.
Different products rose and fell based on market trends, but the point is that bank customers were still buying, just less of them. Bank deposits grew last year, which normally represents a greater opportunity for bank reps because it expands the prospect pool, but brokerage revenue penetration per $1 million in deposits—Kehrer uses this measurement to gauge the importance of brokerage activity to a bank because it’s a benchmark that works for banks of all sizes—fell from $1,963 to $1,678 as investors moved to cash.
Nevertheless, greater deposits means the money is there if advisors can convince prospects that it’s time to buy back into the market.
To regain some lost ground—and revenue—Kehrer said program managers should bolster their advisor headcount while enervating tried-and-true business builders, such as revenue programs and having advisors mine their existing client base for opportunities.
“Banks have a real opportunity to better serve their customers and make money at it,” he said. “But they have to get their blocking and tackling right.”