CUSO Financial Services continues to build `shared investment' network

SAN DIEGO – Much like the established shared branching connections that crisscross the country, CUSO Financial Services is slowly building a link for members to access investment services nationwide. The concept of a “shared investment network,” is well underway with CFS, a San Diego-based broker dealer recently aligning with MediaMap, a CUSO based in Cincinnati to help manage member relationships in Massachusetts, Pennsylvania and Florida. CFS already has satellite centers in Denver and Seattle. The concept is fairly straightforward: CFS enters into a service agreement with the credit union and customizes a solution that meets their members’ needs. This can include online as well as full service brokerage and investment advisory services. Since its launch in 1996, CFS has garnered 65 credit union clients, 250 licensed representatives with revenue of $24 million in 2001. While CFS projects between $35 and $40 million in revenue this year, the challenge sometimes begins with empowering credit unions, convincing them that they can be an investment outlet for their members, said Valorie Seyfert, president/CEO of CFS. “For a long time, some credit unions thought they could not compete with large institutions,” Seyfert said. “One of the things we hold fast and hard to is offering unbiased advice to credit unions and how they can bring services to members at lower costs.” Seyfert said the shared investment network is already happening with a number of credit unions in California and Texas. She cites Community America Credit Union in Overland, Kan. as a prime case study for the need for an expanded system. “They have members in all 50 states and it wouldn’t be feasible to have representatives in all states,” she explained. “A networked system of reps so that members can use the services at their leisure proves to be a convenient option.” Indeed, credit unions continued to expand relationships with firms that provide investment services to members in 2001 despite a volatile stock market and the strongest share growth in 15 years, said Jay Johnson, executive vice president, Callahan & Associates, Inc. The number of credit unions that have investment programs for members in place now stands at 1,167, or 39 more than at year-end 2000, according to Callahan. Large credit unions continue to be the most active in providing these programs to members, as 82% of credit unions with assets over $250 million currently offer investment services. Of the 100 largest credit unions, 91 have investment programs in place, 10 more than at year-end 2000. “Credit union management, wanting to continue to offer solutions to members but faced with stronger than expected balance sheet growth, looked to their investment program partners for assistance in providing off-balance sheet investment options such as annuities and fixed income products to members,” Johnson said. “It is not business as usual for anyone, including credit unions,” Guy Messick, legal counsel to NACUSO. “It is much easier to attract experienced investment and insurance managers to a for-profit entity such as a CUSO rather than a department in a credit union.” He adds that “investment managers culturally work much better with a credit union than within a credit union.” Meanwhile, CFS recently partnered with Raddon Financial Group to help credit unions identify investment sales opportunities and how they impact household profitability. RFG provided core deposit and loan product analysis and member segmentation for 500 credit unions nationwide. Through the CEO Investment and Insurance Program, credit union member household database will be integrated with NCUA 5300 financial information and investment account data retained by CFS. The analysis will be “extremely useful” for targeting key segments to grow credit unions’ investment programs. – [email protected]