Credit Unions With Investment Programs Jump 3%

The number of credit unions offering investment services is on the rise after a five-year period of decline, according to management consulting firm Kehrer Saltzman & Associates, which presented the research at the annual NACUSO Conference in Orlando. 

In 2013, the number of credit unions providing investments increased for the first time in five years, jumping 3% from 2012 to 860. 

The need for more fee income is driving the trend, explained Kenneth Kehrer, a principal of Kehrer Saltzman. “Just like banks, credit unions are under financial pressure from reduced margins on loans,” he said.

The upswing contrasts with larger financial institutions, which report fewer investment programs. As a result of industry consolidation, the number of banks offering investment services through a third-party broker-dealer fell 4% in 2013, said Tim Kehrer, senior research analyst at Kehrer Saltzman. 

According to Kehrer Saltzman, credit union investment programs generate an average of $1,123 in revenue per million in member deposits, beating programs at similar-sized banks, which produce an average of only $848.

The better performance is simply a matter of having the right number of advisors, according to the firm. Credit union investment programs have “thicker” advisor coverage, deploying 22% more advisors relative to their deposit base than rival financial institutions.

Still, credit unions could do better in terms of the number of advisors they employ. Kehrer Saltzman estimates that credit union advisors should optimally cover $150 million in member deposits, far less than the $222 million in deposits they now currently cover.

“The typical credit union should increase its advisor headcount by 48%,” said Kenneth Kehrer. 

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