Banks that own their broker dealer have good reason to smile.
In 2013, revenue from their broker-dealer operations grew 8%, according to a new survey released today by consulting firm Kehrer Saltzman & Associates.
The survey canvassed 19 bank-owned broker dealers, nearly half of the 40 in the U.S.
"The revenue increases were concentrated in the smaller bank broker dealers largely because some of them are expanding into banks acquired by their host institution or are in the early stages of building an investment services business," Kenneth Kehrer, a principal of the consulting firm, said in a statement.
The revenue growth was less impressive, however, when compared to banks and credit unions that outsourced their broker-dealer operations to third-party marketing firms, which grew their revenue by 14% last year.
Still, the overall news for bank-owned broker dealers was positive. According to the survey, they had more productive advisors than those at financial institutions that outsourced their broker-dealer operations. Advisors at bank-owned broker dealers grossed an average of $415,218 for their financial institutions, while those affiliated with third-party marketers produced only $252,629.
A more expensive cost structure, however, hurt the ability of bank-owned broker dealers to contribute to the bottom line. The typical bank broker dealer had pretax net income contribution of just 15% of revenue. For banks and credit unions working with a third-party broker dealer, the pretax net income ranged from 20% to 25%, depending on its size, according to Kehrer Saltzman.
"The profile of bank-owned broker dealers is quite different from the investment services in other financial institutions," Peter Bielan, another Kehrer Saltzman principal, said in a statement.
The new survey, titled "2014 Bank Broker Dealer Survey," is the firm's first to focus on bank-owned broker dealers.
- Bank-Owned Broker-Dealers Decline
- Credit Unions With Investment Programs Jump
- Third-Party Bank Broker-Dealers Boost Advisor Headcount and Revenue