Kehrer Group research has demonstrated repeatedly that financial institutions tend to be under repped—they have too few financial advisors given their opportunity. Not only is adding advisors the most direct way to grow the retail wealth management business, adding advisors actually increases revenue exponentially —firm revenue increases by more than the incremental production of the new advisors. That is because divesting some clients from existing advisors, reducing branch assignments, and moving some advisors to second story settings where they no longer receive referrals all make the existing sales force more efficient.
But in a world of a growing advisor shortage, reluctance of bank and credit union management to add headcount, and burgeoning growth among financial institutions, many banks and credit unions are losing ground in the effort to increase advisor coverage of the institution’s opportunity.
One measure of that opportunity is the size of the institution’s core or share deposits. By that measure, on average advisor coverage in financial institutions thinned out last year. The typical firm deployed one financial advisor for every $638 million in core deposits, 10% less advisor deposit coverage than in 2022.
Banks with at least 25 advisors started the year with the thinnest advisor coverage among the segments we track but improved their coverage 6% during the year. Smaller bank firms experienced a 22% decline in advisor deposit coverage, and now have thinner coverage than the large bank firms. The banks with less than 25 advisors actually increased their advisor headcount 4.7%, but their core deposits grew faster.
Credit unions have thicker advisor deposit coverage than banks, but they also saw advisor coverage slip 22%, even though their advisor forces grew 6.6%. Again, advisor recruitment and retention are not keeping up with share deposit growth.
Given the volatility of deposit movements, advisor deposit coverage is a weak measure of whether an institution has sufficient advisors to cover its opportunity. One alternative measure is advisor household coverage—the number of advisors relative to the size of the institution’s customer or member base.
Viewed through that lens, we have a different picture of advisor coverage. Overall advisor household coverage thinned 3%, but advisor coverage in large firms shrunk 27%. Banks with less than 25 advisors improved their advisor household coverage 6%.
Credit unions, with the thickest advisor deposit coverage, have by far the thinnest advisor household coverage. That is because the average deposits per household is much lower in credit unions. The growth in advisor headcount in credit unions matched the growth in members, while the increase in advisors in the small bank firms out paced customer growth. The opposite was the case in banks with at least 25 advisors.
About the Data
This Highlighter draws on data from the 2023-2024 Kehrer Group Benchmarking Survey. Kehrer Group has been benchmarking the investment services business in financial institutions since the early 1990s. 115 banks and credit unions, which deploy 4,590 advisors, participated in this year’s survey during the first quarter of 2024. We publish the survey findings in three segments:
- Firms with at least 25 advisors (sponsored by Corebridge)
- Firms in Regional & Community Banks with less than 25 advisors (sponsored by Ameriprise Financial Institutions Group and Financial Resources Group)
- Firms in Credit Unions (sponsored by Ameriprise Financial Institutions Group and Financial Resources Group)