As many as 88% of bank brokerage programs now offer fee-based accounts, Ken Kehrer, director of research at Kehrer-Limra, said in a presentation Sunday at the Bank Insurance and Securities Association's annual conference in Hollywood, Fla.
But bank-based advisers are not taking advantage of the opportunity to generate more recurring revenue — only 23% of advisers drop a fee-based ticket in an average month, Kehrer said.
However, bank brokerage programs are earning more on assets that they hold under management. In 2006, bank brokerage programs earned 78 basis points on assets under management, but that figure has risen steadily since then, to 114 basis points, Kehrer said.
"Assets are currently devalued, so it's not all good news," he said. "But it's clear banks are doing a better job of leveraging the assets they already have."
Bank brokerage programs now contribute a higher percentage of a bank's bottom line. This is due in no small part to the terrible time that traditional bank operations have suffered as a result of the economic downturn. Bank brokerage, which has historically represented no more than 2% of banks' bottom lines, now accounts for an average of 8.2%.
However, bank brokerage still gets no respect from bank executives, Kehrer said. Roughly a quarter of bank executives say brokerage is not an important part of their bank's business.
Other data showed that bank reps are receiving 11% fewer referrals than they used to, a problem for bank brokerage programs, which have historically justified lower-than-industry-average payouts with the promise of more warm leads. Correspondingly, in response to subsequent hiring difficulties, payouts at banks have had to rise and now stand at 42% on average, according to Kehrer's data.