Fee Income Growth Opportunities

Credit unions have potential to be more profitable with investment and insurance services.


Is the income opportunity of your investment and insurance services largely untapped? The answer may surprise you.

The recent banking crisis and additional restrictive regulations have increased pressure on depository institutions to enhance fee income. But the income opportunity in meeting the investment and insurance needs of the bank’s customers or the credit union’s members has remained underdeveloped. Some depository institutions make poorly informed decisions about whether and how to offer investment and insurance services to their customers.

Financial institutions currently selling investments could increase their revenue by 76% just by emulating the best practices of top investment programs, according to a white paper on Recognizing the Opportunities for Growth, which summarizes data from nearly 3,000 banks and credit unions. The paper is the first part of the Guide to Growth series by PrimeVest and Cetera Financial Group to help the management of investment and insurance services in banks and credit unions.

Investment Services Opportunity

While U.S. institutions generate almost $10 billion in annual revenue from investment services, Dr. Kehrer’s analysis indicates that this is just a fraction of the industry’s potential. Only one-fourth of U.S. institutions are selling investments, and they are performing, on average, substantially below their potential.

If these institutions could follow the best practices of their peers, they could increase the total industry investment services revenue by $7.5 billion. The institutions not yet selling investments could add nearly another $2.4 billion in industry investment services revenue with just average penetration, and could double that if they achieved best industry practices.

For the third-party broker-dealers (TPMs), this analysis also suggests that the larger revenue opportunity is to improve the operation of existing investment services units, rather than help institutions launch investment offerings. But the largest gains to process improvement are concentrated in the small to mid-sized institutions, which is the sweet spot for TPMs.

Among the institutions not yet selling investments, the opportunity is concentrated, not surprisingly, in the larger banks. But again, the largest returns from achieving best practices are among the smaller institutions.

How do financial institutions achieve best practices? Subsequent Guide to Growth white paper analyses examine:

  • The ideal number of financial consultants to deploy relative to the size of the financial institution.
  • Whether to manage an in-house broker-dealer or outsource those functions to a third-party broker-dealer.
  • How life insurance sales complement and enhance the investment services offering and its contribution to an investment program’s recurring revenue.
  • The optimum mix between traditional transaction business and advisory business
  • The value of and best practices in referral generation.
  • For banks and credit unions contemplating an investment services offering, or for those relatively new to the business, how long it takes to become a mature business and see the “payoff” after starting an investment program.

Maximizing Your Investment and Insurance Services Potential

Finding your financial institution’s potential for more profitable investment and insurance services doesn’t have to be the result of trial-and-error. For well over a quarter century, PrimeVest has focused exclusively on serving the needs of banks and credit unions and their clients, and is a leader in helping them and their financial professionals grow their revenue stream and services to their clients.

For more information about how PrimeVest can help you use best practices to grow your program revenue effectively, visit www.primevest.com



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