The banking crisis of early 2023 swept away 3 large banks, battered bank market valuations, and saw a flight of deposits from regional banks to the very largest institutions.


To check on how this banking crisis was affecting the investment services business in banks and credit unions, Kehrer Group conducted a quick LinkedIn Poll at the end of March.  We found that the crisis was impacting the investment services business significantly in only a small minority of backs.


We had another opportunity recently to assess the impact of the banking crisis on bank-based wealth management at our study group for executives responsible for managing investment services inside a financial institution.  The majority of the participants reported that it was “business as usual” during the banking crisis. The few firms that were impacted negatively were offset by those that experienced an uptick in business.


Digging into their results, it appears that there was an increase in transaction business—fixed annuities and fixed income securities—as investors sought safety and rate.  Some firms experienced an increase in dollar flows, but a decline in revenue, reflecting the low commissions on fixed income business.


These observations are supported by the first quarter data from Cramer + Associates.  For the 11 firms that Cramer covers, revenue was down 0.63%, essentially flat.


There are other ramifications of the banking crisis on the bank-based wealth management business, however.  Bank management’s stress about maintaining deposits resulted in renewed interest in financial advisors referring clients back to the institution, and even compensating advisors to sell CDs.  And it kept the issue of investment sales cannibalizing deposits alive in some institutions.


Forty executives from banks, credit unions, third party broker dealers and product providers attended the Spring meeting of the Kehrer Leadership Study Group at UNC’s Rizzo Center in Chapel Hill May 18-19.  The next meeting of the Kehrer Leadership Study Group is September 21-22 in Durham, NC.