Bank programs set a new record for record for income in the first half of 2014. The 1,386 community banks that offered investment programs in the U.S. (21% of the total 6,608 community banks) produced $289.4 million in program income, up 2.2% from the first half 2013. Moreover, average program income at the mid-year point was $209,000, or 40% higher than it was in the first half of 2007, when banks first began reporting the raw data we use for our analysis here at Michael White Associates.

So there has been growth, but when you drill down further there are also some surprises. One is the love-hate relationship the channel seems to have with annuities.

According to a report we published with our partner, Securities America, annuity commissions bolstered community bank revenue while securities brokerage commissions and fees were essentially flat compared the first half of 2013. Indeed, annuity commissions were up 6.2% in first half 2014, with growth rates in each of the two quarters exceeding those of securities brokerage income. Annuities accounted for 26% of total program income at community banks; and 15% among bigger banks.

But not all banks are enamored. Among the banks that have investment programs, 42% reported no income whatsoever from annuity sales.

Part of this stems from the fact that some series-7 advisors are more the securities broker-type, while the series-6 advisors are more the life insurance agent, packaged-product producer. And some advisors simply don’t see a need for annuities. They complain that fees are too high, yields are limited, and they lock up one’s money. I believe most of the arguments are out-of-date. Products have changed along with the times.

Advisors used to be focused on capturing assets, but these days an increasing part of their business is about income distribution. Layering bonds won’t be enough to provide a stable income to baby boomers in retirement. A portion of client’s assets should go to annuities. Otherwise, competing advisors using effective consultative skills will get that business.

There is also the broader issue, of course, of why relatively few banks engage in investment activities in the first place. The percentage of participants, 20% to 25%, is not much different from the 1990s. As to why, there has been much debate. Put simply, leopards don’t change their spots; change is difficult; people fear change; inertia is the strongest force in the universe. Pick your cliché, in this case they’re true.

These programs are among the least risky and most steady, profitable, publicly needed financial services there are. The return on investment can be good. In many cases, the program returns will exceed the ROE of the bank.

Frustratingly, many bankers just don’t seem to appreciate that investment programs and insurance agencies produce recurring revenue. And unfortunately, they have not devoted meaningful attention, capital, marketing and sales efforts to develop non-interest fee income programs.

Consequently, many community banks continue to earn sub-par returns and ignore the opportunities in other financial services like insurance and investment programs.

Overall, at a time when the retirement tide of baby boomers is rising, managers of these programs might want to re-evaluate the important benefits of secure, steady and dependable income that annuities can provide retirees and consider adding annuity products to their investment programs.


The number of community banks on track to earn a minimum of $250,000 in 2014 investment program revenues increased 4.8% to 541. Also, seven in ten experienced some level of growth in first half 2014 over last year.

Nevertheless, there is concern that growth is slowing by some measures. For instance, those seven in 10 banks that experienced some level of growth is actually less than last year. (It fell to 71% from 74%.)

Also, growth is slowing both in the number and percentage of banks achieving double-digit growth in the first half of this year. Of the 541 community banks on track to generate at least $250,000 in annual program revenue, 287 of them (53%) posted double-digit growth in the first half of 2014. At this point last year, it was 303 banks, or 59%, that had the equivalent double-digit increases.

Still, I feel these measures of a slowdown are temporary, and not a sign of an industry in crisis. Community banks are still generating record levels of investment program income, and their average production has never been higher. But to ensure the negatives don’t become a trend, it would be a sound precaution for bankers to take a look right now at their investment programs and consult with their program managers and sales leaders to determine what is needed to exceed their planned objectives for 2014.

Many community bank investment programs have only one or two financial advisors. Recruiting additional advisors would help build out those programs and better enable the smaller banks to provide more investment products and advisory services to more bank customers. Of course, this would be true for a number of the larger community banks, too.

Other ideas would include: targeted branch manager letters and/or phone calls to good branch customers; special-topic seminars; regular call nights from one centralized location; fully utilizing CRM systems; holding meetings of commercial lenders and financial advisors to review customer accounts and sharing investment customers who own businesses or are senior officers of companies; using all bank media more effectively, such as branch signage, statement stuffers, annual and quarterly reports, local advertising and so forth.

Retooling may mean meeting with the bank’s existing third-party marketer to review the program, performance against plan, whether the advisor is getting all the field support expected, etc. It may require a meaningful overhaul. Or, it may it may be time to give the whole program more than the once over. If the program is underperforming, the bank might need to consider a new TPM. That would involve substantial retooling. Check the upcoming TPM contract renewal date, and begin reviews, discussions and negotiations well in advance of the date.

In other cases, it appears some bank investment programs may need some retooling or increased marketing and sales initiatives in order to more fully attain the organic growth they are capable of achieving. With a record start in the first half 2014, it would be a shame for community bank investment programs to let slip the strong momentum they have been building.

Michael D. White is president of Michael White Associates and author of the Michael White-Securities America Report on Community Bank Investment Programs. Reach him at

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