`Trusted Advisor' Role Crucial for CUSO Investment Reps, but Definition of Trust is Elusive

SAN DIEGO – It may seem obvious that financial services CUSO investment representatives need to be viewed as `trusted advisors’ by credit union members. But members’ definition of `’trust’ not necessarily as obvious as the premise. That became apparent to CUSO Financial Services (CFS) through a series of focus groups it conducted earlier this year to better understand members’ perceptions of the value of investment services, and to determine among those who use investment services if trust is a reason they do or do not use the services of their credit union’s investment representatives. The focus groups were conducted among members of four credit unions that offer investment services through financial services CUSOs – Ent FCU, Workers CU, IBM Mid America CU, and Mission FCU. All of the respondents used investment services – half of the group through their credit union’s CUSO, and half from another source. CFS President Valorie Seyfert said the number one reason given by those members who use their credit union’s CUSO’s services was “trust.” The comments expressed by members who don’t use their credit union CUSO’s services came down to two things : awareness – they didn’t know the CU offered the investment or insurance product through the CUSO; and credibility – they didn’t trust the CUSO investment rep to be an expert. When queried further about why they trusted their CU’s services Seyfert said, “Trust and credibility aren’t what you would assume they would be. Participants’ responses were very intangible.” For example, those that indicated they trusted their CU’s services mentioned `the reps listen to me;’ `there isn’t a long wait time;’ or `they listen and care about me regardless of how much money I have in my accounts.’ Responses among those who said they didn’t trust the CUSO investment representative’s expertise “were more tangible,” said Seyfert, and when they were asked what the credit union would have to do to gain their trust, respondents offered suggestions such as `hire reps with more experience,’ or `offer seminars and workshops.’ “It was very interesting for us to hear the participants in the focus groups articulate why they do or don’t do their investment business with the CUSO and what they consider to be important,” said Seyfert pointing out one consistent message conveyed by all the respondents: it’s important for them to see the credit union as being a trusted advisor, someone they can related to. “This is very important for credit unions to realize because of the negative press and scandals brokerage firms have been involved in. It’s an opportunity for credit unions. For so long credit unions have pushed products, but products are a commodity. Credit unions have always been known for the quality of their services, and that’s what they should stress,” she advised. Doug Peterson, president, Workers Financial Services LLC, a wholly-owned financial services CUSO of Fitchburg, Mass.-based Workers CU agreed that building trust at the credit union level is the first essential. “If the member trusts the credit union at the branch level, that trust will be transferred to the CUSO investment rep,” he said. The CUSO offers investment and insurance services to Workers’ 55,000 members and has about $28 million in assets under management. One of the tools Workers CU uses to build trust among its members and convey to them that the credit union is interested in their financial well-being is it offers free member seminars at least two or three times a month on various topics such as estate planning and saving for college education. Peterson said the seminars “give the members the chance to test drive the credit union and CUSO” and to see if this is a financial that has their interests at heart. “They want us to prove to them in a non-threatening environment, that we know what we’re doing with their investment dollars,” he said. Seyfert also strongly recommended CUSO investment reps set service standards for themselves. “For too long, CUSO investment representatives haven’t been held to the same service standards as the rest of the credit unions because the CUSO has been seen as being separate from the credit union. Everyone at the credit union and the CUSO has to be on the same page. A credit union has to have consistent standards for itself and CUSO, otherwise things fall apart. If a member is put on hold a long time on the phone or if a rep responds to referrals slowly, then the credit union and the CUSO are going to lose credibility with members,” said Seyfert. That’s why, she said, it’s critical for the CUSO to be integrated with the credit union. “Credit unions typically have lacked the integration of service standards,” said Seyfert. “It’s important that the credit union and CUSO work closely so their philosophies and standards don’t collide.” Jim Moore, svp, ENT FCU, Colorado Springs, Colo. and president/CEO of the credit union’s wholly-owned financial services CUSO, Enterprise First Financial Services, appreciates the benefits that stand to be gained from operating the CUSO and credit union in an integrated model. The $1.6 billion credit union began offering investment services to members through its CUSO in January 2000 and for three years operated the CUSO separate from the credit union. On April 1, in anticipation of the now-pending SEC decision concerning the broker/dealer license exemption of CUSOs , Ent realigned the investment program as a credit union product. It currently has about $42.5 million in assets under management. Moore said members’ comments during the focus group reaffirmed much of what the credit union already knew about those of its members who had their investment services with Ent. These are long term members, he said who have an “inherent trust” with Ent FCU, use several of the credit union’s products, and see Ent as a partner in lifetime financial planning. “At the wealth accumulation stage of their life, it made sense to go with the credit union,” he said. What about those members who had investment services through other sources? Moore explained that until 2000 when the CUSO was formed, Ent only offered a streamlined, insured line of products like certificates of deposits. “We weren’t a spec on their radar screen for other investment options,” he said. Based on anecdotal evidence, Moore said he knows that many of those members transferred their investment services portfolio over to the credit union over the past 18 months when Wall Street went through its downturn because the members claimed they were “left out in the cold by their brokers and weren’t hearing from them.” Moore agrees that building a sense of trust between the member and the insured and uninsured sides of a credit union’s business is essential. It’s also critical, he said, for the credit union to get rid of the “artificial psychological barriers” between investment reps and member service reps. “Regulatory and organization barriers have created a sense of competition between the frontline member service representatives and CUSO investment reps. That’s not to the members’ benefit,” he said. – [email protected]