Ramp Up Revenue Potential

Understanding maturity benchmarks is one key to creating a successful investment services program.


In the aftermath of the banking crisis, including cost pressures and fee-income regulatory restrictions, some financial institutions are contemplating whether they should start an investment services program. To better understand the revenue fee income an investment program may provide, one needs to understand the time it takes to ramp up to full productivity.

According to Determining Revenue Potential for a New Program — a white paper published by PrimeVest, a Cetera broker-dealer exclusively focused on serving banks and credit unions — it’s important for these financial institutions to gauge maturity benchmarks in order to better budget their revenue and net income over time. Based on data pooled from five years (2006-2010) of the Kehrer-LIMRA Financial Institution Investment Program Benchmarking Survey, the paper reveals a number of key findings.

1. The sales productivity of financial professionals starts out fairly low relative to industry norms and improves slowly.

During the first six years of an investment services program,data suggests the average sales productivity of a full-time investment professional (excluding trail commissions and advisory fees) is below the industry average for all institutions. Although in the second year, the average sales revenue produced per investment professional tends to be only 70% of the sales productivity of the average advisor, sales productivity grows successively each year until it peaks in the sixth year at 97% of the sales revenue produced by the average financial professional. Financial professionals in banks or credit unions who offer investment services for seven years produce more revenue than the average financial professional.

2. Investment services revenue is less than half the industry average until the fifth year, but then grows sharply.

Like sales productivity, revenue penetration — the amount of revenue the program produces in relation to its opportunity — generally takes seven years to surpass the industry average. Thus, revenue penetration is only 44% to 45% of the opportunity in the second and third years of an investment services offering. It then slightly increases in the fourth year before growing significantly each year thereafter, with the potential of reaching 115% in year seven.

3. Net income from investment services is substantially below industry benchmarks initially, but grows more steeply beginning in the fifth year.

As with both sales productivity and revenue, the ramp-up period for profit contribution lasts around six years. For instance, in 2010, the average net income contribution from investment services in all banks and credit unions was $425 per million dollars of the institution’s consumer deposits. The industry norm for programs in their second year was $128 per million dollars. While five-year-old investment services businesses generated $247 in net income per million dollars in consumer deposits on average, institutions that offered investment services for seven years had an average net income contribution of $523 per million dollars.

These maturity benchmarks can go a long way in helping a financial institution establish an investment services program within the early years of the business. In addition, they can be instrumental in understanding the timeline for the potential of institutions that are not yet offering investment services.  

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 advisors grow their revenue stream and services. For more information about how PrimeVest can help you utilize best practices to grow your program revenue effectively, visit www.primevest.com.


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