Wealth management businesses at banks and credit unions endured a difficult 2016 as revenue and adviser productivity sagged in anticipation of the fiduciary rule, according to this year's "industry checkup" by consulting firm Kehrer Bielan Research & Consulting.
Revenue dipped 1.5% from 2015 across all financial institutions. Banks and credit unions that worked with third-party broker-dealers or TPMs were hit especially hard, with revenue diving 5.9%. At banks that own their broker-dealer, revenue was flat from the prior year.
Adviser productivity as measured by revenue per adviser was also off from 2015, falling 1.5% across the board.
Despite the stagnant performance, things could have been much worse given the toll that planning for the fiduciary rule has taken on bank wealth management businesses, said Tim Kehrer, senior research analyst at Kehrer Bielan.
"We were projecting much bigger hits to revenue," he said.
Adviser headcount took a punch too, slipping 1.1% across all banks and credit unions. The decline was particularly steep for financial institutions that work with TPMs, where the number of advisers slid a significant 8.2%.
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Banks and credit unions scramble to adjust their product choices with a significant 40% of those surveyed developing separate menus for retirement and retail accounts.
February 23 -
The investment services unit of one regional bank is working with 10 of its top producers to whittle their books of business.
March 9 -
The firm has already standardized its variable annuities and alternative investments and is working toward doing the same for mutual funds as well as indexed and fixed annuities.
March 9 -
Consultant Peter Bielan urged bank wealth execs to incentivize long-term thinking on the part of advisers, not just hitting a monthly goal.
March 10
Advisers are concerned about the impact of the fiduciary rule on their compensation as well as the "additional disclosure loops they are going to have to jump through," said Kehrer.
The report did contain somewhat of a silver lining. Investment assets under administration in 2016 rose 5.2% across all financial institutions, with those having a TPM jumping 5.9%.
On its face, the rise in assets is good news, except when compared to the S&P 500, which returned 9.8% in 2016.
The discrepancy, Kehrer noted, could flag a problem to executives worried about assets moving to lower-cost options. "It could be read as a warning sign that assets are leaving," he said.
