Credit union advisors are stretched too thin.
According to research from Kehrer Saltzman & Associates, the typical credit union would have to increase the number of advisors it deploys by 39% to get to the same deposit coverage as community banks.
The typical credit unions investment services unit has one financial advisor for every $446 million in member share deposits, compared to a consumer deposit coverage ratio of $320 million per advisor in community banks, Kenneth Kehrer, a principal of Kehrer Saltzman, said in a statement.
The lower coverage ratio helps explain why credit unions trail community banks in penetrating the investment services opportunity, Kehrer contends. The average credit union generates $1,033 of revenue per million of member share deposits. Community banks, in contrast, generate $1,295.
Better coverage of the member opportunity is the single most important way a credit union or a bank can improve its revenue and net income penetration from investment services, added Christine Kehrer, director of research at Kehrer Saltzman.
The impact of greater advisor coverage was found to be significant. According to the research, credit unions with the thickest coverage had more than four times the net income, relative to their share deposits, as credit unions with the thinnest coverage. Credit unions with the thickest coverage had less than $250 million in share deposits per advisor, while those with the thinnest coverage had more than $600 million in share deposits per advisor.
While community banks have stronger coverage ratios than credit unions, theyre still not strong enough, according to Kehrer Saltzman. Our research indicates that the optimal coverage ratio is one advisor for every $150 million in consumer or member deposits. That means that the typical community bank would have to double the number of financial advisors, while the typical credit union would need almost three times as many as it now has, said Kenneth Kehrer.
The relatively thin coverage of advisors in credit unions helps explain the general lack of awareness among credit union members of the investment services offered at their credit unions, the researchers say.
The research, presented at LPL Financial Institutions Credit Union Advisory Council meeting in Laguna Beach last month, drew on data from 798 credit unions with investment services offerings and an in-depth survey of a sample of 45 credit unions.