Some of those credit unions are just so darn clever.
Convenience, cooperative spirit, low loan rates, no big bank stigma. And now some even offer online stock trading.
An increasing numbers of CUs throughout the country are teaming up with outside brokerage services to offer financial planning and a slew of investment products to members, including mutual funds, annuities, online stock trading and life insurance.
While such investment options are increasingly available through many large banks, they’re certainly not a staple of smaller financial institutions.
But they should be.
According to findings from Charlotte, N.C.-based research firm Kehrer Saltzman and Assoc., an investment relationship with a CU boosts membership loyalty, cementing the customer relationship and locking in additional years of revenue from credit union services.
There are a number of investment firms catering to the CU industry, including BestVest Investment, outside Detroit; San Diego-based CUSO Financial Services; INVEST Financial, a Tampa, Fla. subsidiary of Britain’s Prudential and CUNA Brokerage Services Inc. (CBSI) a Madison, Wis.-based subsidiary of CUNA Mutual Group.
CBSI says it’s the largest provider of broker-dealer services to credit unions, with 250 credit unions programs, 400 advisers and more than $3 billion in mutual fund, annuity and managed account sales.
In return for offering CBSI’s services, participating credit unions reaped $60 million in fees last year. This year, CBSI will pay credit unions more than $65 million in fee revenue
CBSI has five credit union programs and one bank program in the Bay State. The bank is HarborOne, which converted its charter from a credit union to a bank early this year, and had already been offering CBSI services to members. In the other New England states, CBSI has an additional nine programs with credit unions.
Free Financial Planning
CBSI adviser Sean Farrell works exclusively with Align Credit Union in Lowell, dividing his time between the credit union’s six branches,
The program has been in effect for 10 years. As a full financial planning firm, CBSI gives Align CU members the opportunity to get a free analysis of their financial situation, along with recommendations. It’s the kind of service a financial firm would charge hundreds of dollars for.
“We look at the entire picture, from a member’s basic budget all the way to estate planning,” Farrell says. “We analyze it and make recommendations. We’ll look at what their mortgage rate and car loan rates are, and whether they are too heavy on credit card debt.”
Marketing Matters
Align trains its staff refer members who may need help with financial planning and investments to Farrell.
And to boost interest, Farrell conducts several seminars on financial topics for the CU’s general membership. Sometimes, he’ll bring in an accountant or attorney to explain complex estate planning issues.
Marketing Farrell’s financial planning services to Align’s members is crucial to the program’s success. Even though offering financial planning, brokerage services and wealth management at the local CU branch seems like a great idea, it takes commitment from the CU’s leadership and staff to make the whole thing work.
Some credit unions that partner with outside brokerages fail to promote the service properly. The result, a recent study by Kehrer Saltzman found, is that only 18 percent of 2,040 credit union households surveyed said they place a great deal of trust in credit union financial advisers. So, if the program isn’t promoted properly, credit union members could end up paying Ameriprise or Fidelity for services they could get for free at their credit union.
Align’s senior executives meet quarterly with Farrell and survey members to gauge reaction to CBSI’s insurance and investment options. Occasionally, Align hires actors to test Farrell’s customer service skills. The actors pose as members and tell Farrell they need financial planning help. Afterwards, they rate him on his customer service skills and the value of the information he gave them.
Farrell says he doesn’t mind being tested on his customer skills and CBSI’s investment products.
“We have a very good relationship with the board of directors, CEO and CFO, and they want to make sure members are consistently getting top-of-the-line service,” he says.
While credit unions appear to be in the forefront of small financial institutions broadening their financial product offerings, some community banks have also realized the value of offering brokerage services.
The Lowell Five Cents Savings Bank, for example, has teamed with Baystate Financial Services to offer education, retirement and estate planning, separately managed investment accounts and financial planning services to customers.
Some of those community banks are pretty darn smart, too.
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