CFS: Credit unions bringing more investment experience to the table

<p>SAN DIEGO – What a difference four years have made in credit unions’ experience with offering investment services to members through CUSOs. Valorie Seyfert, president of CUSO Financial Services recalls when she and COO Amy Beattie founded the company four years ago, CUs were just getting started with the service offering and weren’t that familiar with the in’s and out’s of investment products. “As credit unions’ investment programs, especially those of the larger credit unions, have changed, credit unions’ understanding of the business has grown enormously,” says Seyfert. “Credit unions now are intimately involved with investment programs. These programs have changed the way credit unions look at the relationships they have with their members,” she says. CFS is owned 75% by a group of 19 limited partners that represent 38 credit unions and CUSOs that use the company’s services. CFS currently serves more than 60 credit unions, and serves a CU user base of approximately 5 million credit union members and $34 billion in assets. Seyfert reports CFS continues to grow about 70% a year in revenues and 80% in assets. When Seyfert and Beattie formed CFS in 1998, they already decided they wanted to give credit unions the opportunity to participate in ownership of the company. Phase 1 was offered at the outset. They offered 40 units for $25,000 per unit, with the average credit union purchasing six units. Seyfert said these early investors “took the most risk.” Phase II was offered immediately following the close of Phase 1 – they offered 30 units for $32,500 per unit, with the average credit union purchasing seven units. CFS opened Phase III about three months after the close of Phase II, with 50 units going for $50,000 per unit. Based on the current demand for additional units, CFS is preparing to open a Phase IV later this year. Seyfert said she and Beattie have been following closely the news concerning the Securities and Exchange Commission (SEC) possibly requiring the marketing of investment programs to be operated directly through credit unions and prohibiting CUSOs from sharing commissions with broker/dealers. The SEC has indicated that due to the NCUA Board’s passage of Incidental Powers, that CUSOs are no longer a “required service corporation” and therefore are not able to share commissions (see related story page 18). Should the SEC decide to require moving CUSO investment programs and services into credit unions, Seyfert opines that CUSOs will still be needed to operate investment services because many states do not allow credit unions to offer insurance products to members. “There will still be a need for CUSOs to help credit unions realize the potential of offering investment products,” she says. Seyfert is more concerned about the effect the SEC decision may have on those credit unions that have been deliberating offering investment products but which have reluctant to. “I hope this doesn’t sway them away from getting involved with investment services,” she says. “There are so many competitors of credit unions waiting to take members’ deposits.” -</p> <p>[email protected]</p>