Despite Small Size, Hoyt Lakes Community CU Adds Trust Services in its Aim for `Primary Financial Institution' Status

HOYT LAKES, Minn. – When Hoyt Lakes Community Credit Union set out to align with a firm that would provide trust services in a quest to become the primary financial institution for its 5,100 members, some were skeptical given the credit union’s size. But Don Werdick, Hoyt Lakes’ president/CEO, said all along, the strategic plan centered on competing with the larger financial institutions in the area – Wells Fargo, U.S. Bank, American Express, New York Life and Fidelity Guaranty and Life and proving to members that all their financial needs could be met through under one umbrella. “Overall the historic (credit union) model is simple,” Werdick said. “We bought money (deposits) and sold money (loaned or made other investments) and collected some service fees. Most credit unions still do this. But in the Fall of 1998, we made the proactive decision not to settle for mediocrity and started the journey to become a more dynamic organization.” Though small in size with $32 million in assets, Hoyt Lakes launched its credit union service organization, CU Financial Services of Minnesota in 2000 offering assistance with 401k and pension rollovers, retirement and estate planning, tax deferred and tax sheltered annuities, employees and business benefit planning and investment and brokerage services. Thus far, the CUSO has $4 million in assets under management through 400 clients and expects to more than double those figures to $10 million and 900 respectively over the next two years. Werdick said immediate plans include aligning with up to five area credit unions by the end of the year. The CUSO is well on its way. In December 2002, Blandin Area Federal Credit Union partnered with Hoyt Lakes to become the first to offer its members services through the CUSO, a move in synergy with the four-year strategic plan that calls for bringing up to 12 more credit unions into the partnership by 2007, Werdick said. The credit union will retain 75% ownership and each credit union partner will share a 25% interest in the CUSO. Here in the northwestern part of the state commonly referred to as the Mesabi-Vermilion Iron Range region, Werdick said separately all 12 area credit unions have less than $25 million in assets but collectively that number equals $400 million in assets and 40,000 members. That potential client base was enough of an impetus for the CUSO to launch its trust services division set for rollout in March or April. Through an alliance with Securian Trust Co., N.A., an affiliate of Minnesota Life and Advantus Capital Management, members and non-members will have access to a plethora of asset management and portfolio development and maintenance services. Still, finding a trust company that would partner with a credit union of Hoyt Lakes’ size, was “frustrating” Werdick said. “Most said we were too small and it would be a waste of time,” he recalled. “We also wanted to find one that fit with our needs and one that worked with CUSOs so the search took about six months.” Werdick also credits Guy Messick, general counsel with the National Association of Credit Union Service Organizations for “believing in the vision” and supportive board members. “Quite frankly, if we were to operate our own trust services (from scratch), we couldn’t afford it, Werdick admitted. “Securian was key because the operation set-up proved to be more efficient.” The firm will also work with clients whose assets fall in the $300,000 to $500,000 range, a bracket generally unheard of by other trust banks that typically serve those with a minimum of $1 million in assets. Indeed, the demographic here may be considered the ideal target for the CUSO’s trust services division. Werdick said there is a high concentration of baby boomers and retirees from area steel mines who have built considerable wealth for their retirement needs and of the 111,000 residents here in St. Louis County, 40,000 belong to a credit union. The CUSO hired Merrilu Kuitunen, as the financial consultant who brings with her a dearth of experience in the banking, credit union and investment areas. Werdick said they are in the process of hiring a financial sales administrator and an additional consultant. To get the word out to the community, the CUSO has aired 100 spots each month on the local television affiliate, running them during popular shows such as Dr. Phil, NBC’s Today Show, Meet the Press and on CNN, Lifetime and ESPN networks. Werdick said a one-year advertising deal with KBJR surprisingly turned out to be cheaper than newspaper advertisements. Hoyt Lakes’ CUSO model has been so formidable that out-of-state credit unions have expressed interest in partnerships, an association that board members are not entertaining, instead concentrating on controlled, local growth, Werdick said. At the very least, Werdick sees their two-year old, thriving CUSO as a “visionary” for other credit unions that fall within the $30 to $50 million asset range. “Many small credit unions don’t think they have the planning and resources to be the primary financial institutions for its members,” Werdick said. “If it means partnering with other surrounding credit unions to bring all financial services under one roof, it can be done.” -