Risks Involved in Offering Trust Services Outweigh Losing Members, CUNA Mutual Expert Says

ALBUQUERQUE, N.M. – The opportunities and risks trust services present are sound reasons for credit unions to consider offering this wealth management service to members, said a CUNA Mutual expert recently. Speaking at NASCUS’ recent annual meeting, Steve Garvey, CUNA Mutual Group Trust Advisory Services manager, told attendees “the upper tier of credit union members is in need of trust services because banks and trust companies are moving up market, seeking customers with more assets.” A long-term benefit of offering trust services is that it attracts new members and assets that will be retained over multiple generations, Garvey said. He cautioned that credit unions face risks in not offering members the expertise to manage their assets. “The risk in not providing trust services is that this tier of members will find this service elsewhere and with them will go their assets under management at your credit union,” he said. “It’s a group of members your credit union can not afford to lose.” Garvey said the estimated personal net worth of Americans over age 50 is between $12 trillion and $15 trillion, which amounts to 70% of all personal wealth. Buying into an established trust company reduces start-up costs such as recruiting and hiring staff, charter application and fees, legal expenses and does not require capital to be set aside, Garvey noted. Garvey said partnering with an established trust company also lessens a credit union’s risks, as the trust firm already has analyzed and mitigated issues of liability and insurance. Still, buying into a partnership has its downsides, including having little control over product and service offerings. Building trust services within the credit union provides control over products, services and pricing, Garvey said. But some of the drawbacks begin in the start-up, including regulatory compliance, insurance and liability issues, capital contributions, marketing and operations. “There are also ongoing issues such as risk management, working capital and complying with statutes and regulations,” Garvey added. Garvey suggested MEMBERS Trust Co. as one example of how a credit union could buy into a partnership. MEMBERS Trust, the only national trust cooperative exclusively serving the credit union marketplace, opened for business in November of 2003. It currently has relationships with 30 credit unions nationwide in either an agency franchise capacity or as a representative franchise. MEMBERS Trust is on track to have 35 offices open in credit unions by the end of the year. The growth rate of households with $100,000 to $1 million in assets exceeds 10% every year, Garvey said. [email protected]