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Windsor, CT, September 7, 2007 — Credit union brokerages that currently lag behind their bank counterparts can improve their investment sales performance by hiring more financial advisors and getting them more referrals, according to the 2007 Kehrer-LIMRA Credit Union Brokerage Study.

The study, sponsored by Essex National Securities, Inc. and now in its second year, shows that investment sales programs in credit unions have lower financial advisor productivity, slightly lower revenue penetration relative to their size, and thinner margins on that revenue than brokerage programs in banks.

But some credit union brokerages have outstanding levels of advisor productivity and compare favorably with the revenue and profit penetration of brokerage programs in banks of similar size.

"Looking behind these benchmarks, we found that credit unions with lower advisor productivity have accumulated fewer assets per financial advisor," said Scott Davis, president of Essex National Securities, Inc. "But credit unions have been in the brokerage business for fewer years than banks, and the difference in the age of the investment sales programs accounts for three-fourths of the difference in assets per advisor."

"The lower brokerage revenue penetration in credit unions is largely due to the thinner deployment of financial advisors and the fewer referrals produced relative to the opportunity," noted Kenneth Kehrer, Ph.D., the author of the study. "If the typical credit union brokerage program were to adopt the same advisor coverage ratio as the average bank, it would have to increase its advisor headcount by 17 percent. To produce the same number of referrals to financial advisors as the average bank, the typical credit union would have to increase its referrals by 27 percent."

Davis added that the lower brokerage profit margin in credit unions is due to the constraints of institution size and economies of scale, but not necessarily to the differences in product mix.

"Compared to banks, credit unions sell more variable annuities and fewer fixed annuities, in part because of the much greater prevalence of bank platform investment sales reps selling annuities," he said.

"In credit unions, relatively more revenue is derived from mutual fund sales, and relatively less revenue from stock and bond transactions. The credit union brokerages studied earn much more of their revenue from fees on managed money accounts, as opposed to securities transactions, than banks. Thus credit union brokerage is building a stronger foundation for future profitability."

According to Kelly Haskins, managing director of Kehrer-LIMRA, credit union brokerage appears to have achieved better integration with the host institution than bank brokerage has.

"That could explain the finding that fewer credit union brokerages — only 30 percent — plan to expand this year," Haskins said. "For institutions planning to expand, both credit union and bank brokerages are focused on increasing the flow of referrals from the host institution and encouraging advisors to work their existing brokerage customers for more business."

Haskins noted that credit union brokerages see financial advisors as their growth engine, while banks are more likely to see growth coming from a balance of financial advisors and platform banker sales forces.

This second annual Credit Union Brokerage Study included data from 51 credit unions, ranging in size from $169 million in member deposits to $24 billion. The data for the report came from the 2006 Kehrer-LIMRA Financial Institution Investment Program Benchmarking Survey, also sponsored by Essex National Securities. That survey encompassed 126 banks and credit unions that collectively account for over half of all investment sales in financial institutions. Kenneth Kehrer Associates, and its successor Kehrer-LIMRA, has been conducting the survey since 1991.

About Kehrer-LIMRA

Kehrer-LIMRA, a subsidiary of LIMRA International, is the leading provider of research and consulting on banks and credit unions as financial services stores. Visit Kehrer-LIMRA at LIMRA International is a worldwide research, consulting and performance improvement organization that helps more than 800 insurance and financial services companies in 70 countries increase their marketing and distribution effectiveness. Visit LIMRA International at

About Essex National Securities

Essex National Securities, Inc. (ENSI) is a leading third party provider of securities brokerage services to credit union and banks.

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