The profile of bank-owned broker dealers is quite different from the investment services in other financial institutions, said Peter Bielan, another KSA principal.

“Their (advisers) have much higher productivity and a different product mix, and the firms have a very different expense structure,” he explained.

Tim Kehrer, senior research analyst at KSA, pointed out that the average gross revenue produced per adviser in the bank-owned BDs was $415,218, compared to $252,629 for their peers affiliated with third-party BDs.

Almost one-fifth of that revenue came from advisory and other fee-based products, compared to 14% in the banks and credit unions that use third party broker dealers, he added.

“On the other hand, because of their more expensive cost structure, the typical bank BD had pretax net income contribution of just 15% of revenue,” said Kenneth Kehrer. “The typical bank or credit union working with a third-party broker-dealer has pretax net income of 20% to 25%, depending on its size.”

The bank BDs averaged $8.4 million in new assets per adviser last year bringing the total assets administered per adviser to $74.5 million, said Tim Kehrer. While 8% of those assets are managed by the bank or bank-affiliate, 21% of the new assets acquired are managed in house, suggesting an increasing emphasis on proprietary management in the bank BDs, he noted.

Nineteen broker-dealers owned by financial institutions, which make up almost half of all the bank-owned BDs in the U.S., participated in the survey, according to KSA.