Wisconsin investment CUSO opens investment, tax preparation services door for small Cus

<p>TWO RIVERS, Wis. – Lakeshore Investment & Tax Service has managed to beat the odds twice in its short lifetime, which isn’t bad for a CUSO that’s owned by five small credit unions ranging in size from $6 million to $60 million in assets. Just the fact that Lakeshore Investment & Tax Service was able to be organized is its first success. The idea for the multiple-owned CUSO germinated with Ken Beine, president/CEO of Shoreline CU in Two Rivers, Wis. and Terry Ostrander, a SCU board member who had several years of private accounting firm and tax return experience. Beine had attended various credit union seminars and heard about larger credit unions forming CUSOs to offer investment services. The idea of providing a similar service peaked Beine’s interest, but he realized that Shoreline CU, with $54 million in assets and about 12,000 members, was too small to go it alone because of the risk. Undeterred, Beine and Ostrander consulted with Steve Dowden, CUStOm program manager for CUNA Mutual Group who advised them to consider setting up a multiple-owned CUSO that included several small CUs. Beine admitted he was a bit nervous at the prospect of approaching other small credit unions about the idea of setting up the CUSO. “The first thing that typically happens when you talk with a small credit union about doing anything new is they’re uncomfortable with it,” he says. Undeterred, Beine and Ostrander worked up a business plan that initially included 14 credit unions, but was eventually scaled down to five credit unions, each having equal investments in the CUSO – $50,000 each – and having an equal say in the CUSO’s activities. In addition to Shoreline CU which has $54 million in assets, the other four Wisconsin CUs that share in the ownership of Lakeshore Investment & Tax Service are: Shipbuilders CU, Manitowoc, $21 million in assets; Holy Family Memorial CU, Manitowoc, $6 million in assets; Sheboygan Area CU, Shebogan, $25 million; and Maritime CU, Manitowoc, $7 million in assets. The five CUs’ combined assets of almost $120 million and 28,000 members has allowed the CUSO to leverage opportunities each of the credit unions couldn’t have considered on their own. For one thing, the CUSO also signed with CUNA Brokerage Services and is using them as a broker-dealer to buy and sell securities for members and for securities compliance services using CMG’s Registered Member Service Representatives (RMSR). The RMSRs are employees of the CUs who are trained through CUNA Mutual’s MEMBERS Financial Services program and act as a `shared’ employees of each of the credit unions and CUNA Brokerage Services. As Series 6 licensed representatives, the RMSRs can sell mutual funds to members. The more serious questions and issues are handled by Ostrander, who stepped down from the board of Shoreline and was named president/CEO of Lakeshore Investment & Tax Service. He is the only Series 7 licensed employee of the CUSO. Designated employees of each credit union have been taking the necessary training to be eligible to take the Series 6 and 63 license exams, and are also completing the mandatory life insurance class for broker/dealers. The series 63 license will allow them to sell securities in Wisconsin. The life insurance class lets them sell annuities. At press time, three people had passed the series 6 license test, and three more were in the process of preparing for it. Going into the CUSO, Ostrander said the participating credit unions realized that, “This is not a service everyone will use because members aren’t accustomed to turning to their credit union for investment services. We estimate that about one in 20 members will look to the CUSO for their investment services, but that’s alright. It would have been difficult or impossible for any one of the five credit unions to reach the $100 million requisite level by themselves, but together the CUSO allows the little dogs to offer members investment services.” That brings Lakeshore Investment & Tax Service to its second success: seven months after opening its doors for business on Oct. 1, 2001, the CUSO hit its $1.5 million assets-under-management goal it set for itself for the year, the lion’s share of which is made up of mutual funds and stocks. It also completed about 120 tax returns for the CUs’ members. Dowden says the credit for Lakeshore Investment & Tax Service “belongs to Ken and Terry, they drafted the idea and put the business plan together. They knew their members were getting investment services from another source, and they were determined to find a way to keep that part of their members’ services.” What’s more, Dowden said, Lakeshore Investment & Tax Service is the only CUSO in the U.S. that is performing tax services for members in-house, instead of contracting the work out. “It makes so much sense to have both components, tax and investment services, in a CUSO. When a member brings their tax return in to the CUSO to be completed, they can be advised about how making sound investments could affect their tax return.” Having reached his first-year goals for Lakeshore Investment & Tax Service sooner than he expected, Ostrander isn’t shy about discussing his new goals for the CUSO: By the end of 2002, he wants the CUSO to open two more branches, have five or six new CUs join the CUSO and have representatives from them in the new branches. Then by the end of 2003, he wants Lakeshore Investment & Tax Service to have a total of five branches and in 2004, seven branches. More CUs will be encouraged to join the CUSO. As a C corporation, Ostrander said the CUSO will sell shares of stock to incoming credit unions that join. When Lakeshore Investment & Tax Service gets to the point when it breaks even and can pay out dividends, all the participating credit unions will get equal dividends. Ostrander is confident the CUSO will reach these goals. -</p> <p>[email protected]</p>