Annual Checkup Offers Clues to Impact of Crash in Equities Market


The last market downdraft—during the last quarter of 2018—cast its shadow over the performance of the investment services business in banks and credit unions all during 2019.  According to the Kehrer Bielan Annual Industry Checkup, the severe decline in asset valuation was reflected in a sharp reduction in fees on assets under administration in the first quarter of 2019.  As the markets came back, accelerating later in the year, investment fees recovered, but not enough to fully fill the hole created in the first quarter.  Investment services revenue was down 1.3% from 2018.


The current market crash is more severe and is expected to have an even greater impact on investment services revenue in banks and credit unions during the coming year.  But the Annual Checkup provides a window on what to expect for the relative impact of the markets on different kinds of financial institutions.


Last year revenue was actually up 3.8% in banks and credit unions that provide investment services in partnership with 3rd party broker dealers.  The revenue shortfall was concentrated in the 41 larger banks that own their own broker dealer.



That difference is largely because the bank-owned BDs are further along in the industry transition from a transactions-for-commissions model to providing investment advice for fees on assets under administration.  Last year the typical bank-owned BD derived 38% of its revenue from advisory business, compared to 26% for the banks and credit unions that partner with 3rd party BDs.


The investment services units and their advisors in all financial institutions will suffer revenue shortfalls as the current market valuations work their way through the lag in payment for fees on assets.  But the underlying difference in the mix of business among financial institutions indicates that the large bank BDs, and their advisors, will suffer the brunt of the impact.


Since 2012, Kehrer Bielan has combined proprietary and industry data to provide an annual review of the health of the investment services industry in banks and credit unions. The data for the 2019/2020 Annual Industry Checkup cover 2,202 of the banks and credit unions that provide investment services, which collectively manage 12,954 advisors. This year’s Checkup is sponsored by Cetera Financial Institutions.


Download your copy of the Annual Industry Checkup.


About Cetera Financial Group®

Cetera Financial Group (Cetera) is a leading financial advice firm. It empowers the delivery of an Advice-Centric Experience® to individuals, families and businesses across the country through independent financial advisors as well as trusted tax professionals and banks and credit unions.

Comprehensive services include wealth management solutions, retirement plan solutions, advisory services, practice management support, innovative technology, marketing guidance, regulatory support, and market research.

Cetera Financial Group” refers to the network of independent retail firms encompassing, among others, Cetera Advisors LLC, Cetera Advisor Networks LLC, Cetera Investment Services LLC (marketed as Cetera Financial Institutions or Cetera Investors), Cetera Financial Specialists LLC, and First Allied Securities, Inc. All firms are members FINRA / SIPC.