From Risk to Safety – Trends in Retail Investment Program Revenue

Overall shifts in product revenue demonstrate the larger marketplace shifts in consumer investments.


In 2009, the financial markets began to bounce back from the historic downturn that began in October 2007. Credit union retail investment programs, for example, increased assets under management by 7% from December 2008, reaching $43.1 billion at year-end 2009. During the same period a year earlier, assets under management fell 20.3% from $50.4 billion in 2007 to $40.2 billion in 2008. Recognized revenue from the held assets has changed significantly over the past few years. The data presented in this article is from the annual Callahan/SCS Retail Investment Services Study and does not represent a direct year-over-year comparison; however, the overall trends indicate marketplace shifts. 

From Risk to Safety
A three-year trend of moving money to safer investments is clear when comparing reported revenue by product type.

Revenue by Product Type

Fixed annuity sales increased over the past three years and now represent 21.1% of total revenues to credit union retail investment programs as of year-end 2009. This is up from 6% in 2007 and 11.8% in 2008. In contrast, the revenue from both mutual fund and variable annuity sales have decreased during the same reporting period. By year-end 2009, mutual fund sales represented 17.8.0% of revenue, down significantly from the 24.1% in 2007. The variable annuity share of revenue in 2007 stood at 42.2%. A year later the total revenue from this product declined to 34.6% and at year-end 2009 it declined further to 31.4%.

The decline of the reported variable annuity revenues by participating credit unions is in line with the industry trend for the sale of variable annuities as tracked and reported by Morningstar (Financial Planning magazine, March 2010 issue, page 86). It reported that 2009 third quarter sales were down 17.3% year-over-year from third quarter of 2008.

Expansions to Advisory Services
Expansion in Fee-based, Advisory Services Revenues Fee-Based/Advisory revenues continue to grow in all respects as more credit unions expand their current programs to include this important offering for their members. By year-end 2009 this channel represented 11.3% of total revenues, up from 8.1% in 2007 and 10.8% in 2008.

As revenue is paid quarterly for this channel and is based on assets under management, revenue increased despite lower account values. Continued growth in this revenue share is indicative of the overall channel’s growth as new accounts and assets are being added to existing programs and an increasing number of credit unions are offering this service.

Trail Revenue Decreases
There was a decrease in the reported “trail” revenues that are received based on the ongoing value of most mutual funds and variable annuities. The revenue share from this product was 18.9% in 2008, but it declined 4.4 percentage points to 14.5% in 2009. The overall reduction in account values along with an anecdotal trend as members are spending down funds for possible movement into fee-based/advisory account relationships are two drivers of the decrease in trail revenues.