TAMPA, Fla. – As the idea of a nationally-chartered trust company that would serve credit unions from coast to coast was bandied about nearly three years ago, some in the industry were skeptical about whether it could be pulled off. Quietly, others wondered if that `personal face time' would get lost in an area of service that heavily depends on building long-term and preferably local relationships with trust officers to help guide private and urgent estate planning needs. Fast forward to November 2003 with the launch of MEMBERS Trust Co., the only credit union-owned trust company with a charter that allows it to serve credit unions in all 50 states. As the venture celebrates its one-year anniversary, the numbers may prove the nay-sayers wrong. Since opening its doors for business, MEMBERS Trust has amassed 28 credit union clients, 23 owners and $74 million in assets under management. So far, $23 million has been raised in capital with another roughly $4 million to come. "The founding shareholders said this company will be owned by credit unions," said Tom Walker, MEMBERS Trust, president/CEO. "We've met every goal and some goals we've exceeded. We've had a great first year." MEMBERS Trust was formed by the $4.3 billion Suncoast Schools FCU and CUNA Mutual Insurance Society. The credit union merged its existing, 16-year old trust company into MEMBERS Trust. In 2001, MEMBERS Development Co, a partnership between credit unions and CUNA Mutual formed to develop new products and services, endorsed a strategy that would create a national credit union-owned trust cooperative. Today, MEMBERS Trust offers a comprehensive range of services including investment management; trust administration; estate planning; estate settlement; custody; retirement plans; and reverse mortgages. Credit unions can chose from two set-up options: the "agency office" option establishes a trust presence in a particular state and requires a trust officer to be physically located in a credit union; the "representative office" option is an extension of the credit union's financial services program and does not require hiring a trust officer, but instead, utilizes the services of specially trained representatives to consult and make recommendations for trust services. For $400 million Purdue Employees Federal Credit Union (PEFCU), which has a heavy concentration of university faculty, staff and students among its membership, a survey to determine whether there was an actual need for trust services revealed some surprises. While only 5% of its 57,000 member base said they would welcome trust services, most in that percentage were "high net worth" members, said Bill Connors, PEFCU president/CEO. "These are members we don't want to lose," Connors said. "Because of the diversity of our membership, we didn't think we could support the (trust) business. Eighty percent of our membership is supported by Purdue University." PEFCU chose the "representative" MEMBERS Trust option in January and officially started offering services in July. Since then, Connors said they've exceeded their goals amassing two successor trusts with an average value of $1.2 million each and managing two funded trusts worth $1.5 million. Realizing that trust services doesn't offer quick returns and relationships can take months to form, PEFCU's numbers are right on par. "We certainly didn't get into this for the short-term returns," Connors said. "This will help us build relationships with members. We're looking long term." It's those relationships that some in the industry say banks have neglected. By some estimates, a number of large banks have raised the minimum initial value for a trust account to $1 million or more. Credit unions certainly aren't turning away those accounts but overall, they're seeing a more realistic range of $250,000, even $500,000 and up. "There's a belief that with the number of bank mergers where local banks have been acquired and credit unions having a dominant brand in a sizeable town, members are going to want to stay local with trust services," said John Henry, senior vice president of CUNA Mutual and CEO of MEMBERS Development Co. Indeed, local trust officers are going to seek out local attorneys and accountants building on that long-standing tradition of building relationships found in estate planning, Henry said. For credit unions on the fence about identifying a tangible need for trust services, the process can start with demographics and balance sheets, Henry said. MEMBERS Trust helps the credit union pinpoint who will benefit most and especially zero in on how their field of membership looks. Credit unions are also encouraged to talk to local attorneys and accounts to gather feedback on whether there's room to form alliances amongst each other. "Credit unions can look on or off the balance sheets and ask themselves `what are the chances (we) can be a corporate trustee," Henry said. "If you look at the average credit union and its deposit base, it's probably dominated by older members. There's a great reallocation of wealth that's getting ready to take place." That wealth transfer Henry is referring to is the more than $41 trillion that is expected to exchange hands from one generation to another over the next five decades. The topic is of such a timely nature that CUNA Mutual conducted a Wealth Management Trust School in Madison in November. Attendees, whose credit unions have enlisted MEMBERS Trust Co.'s wealth management, wealth transfer, and investment services, learned how to identify, contact and refer members who could best benefit from trust services. "There is heavy competition from banks for our members, and by offering trusts, we will not lose them," said attendee Kevin Driscoll, trust liaison officer at $1.9 billion GTE Federal Credit Union. J.R. Ridge of $951 million Baxter Credit Union said "Baxter has had a strong MEMBERS Financial Services program, but it wasn't reaching the top executives of our (field of membership) company. By adding trust services, we'll have an additional tool to attract these executives and take care of their advanced needs." Fifty years may seem a long way off but credit unions may be able to sow seeds now even as they own up to the reality that returns in the trust business aren't typically seen until more than five years down the road. " " As baby boomers mature, wealth transfer becomes an issue," said Dan Wroblewski, CUNA Mutual vice president of wealth management, adding credit unions can "build their book of investments while keeping members loyal." For $120 million Coca-Cola Company Family Federal Credit Union (CCFFCU), offering trust services fits with its mission of being the primary financial institution for its 12,983 members, said Dan McCue, president/CEO. The credit union signed on as representative office with MEMBERS Trust in October and McCue served on the MEMBERS Development Co. think tank when a national trust company was just an idea nearly three years ago. "We're still in the early stage of awareness," McCue said. "We did recognize that because we have a pretty large group of affluent members, we wanted to be able to satisfy their (trust) needs and not have to refer them." McCue said "it made sense" to partner with MEMBERS Trust because the credit union was building on an existing relationship it had with MEMBERS Financial Services, CUNA Mutual's personal financial management program. CCFFCU "Why go in and try to build the ballpark?" McCue said. "We didn't want to sit in the bleachers and watch. It's going to be a slow build (and) we're not expecting huge numbers (but) we have the support structure in place." It also helps that CCFFCU has a national field of membership and members have embraced its shared branch relationships, McCue said, adding there may be plans to position the credit union as an "agency" trust office in the future. Looking ahead to 2005, Henry and Walker said some of its goals are to continue to grow its agency office by at least seven and align with more credit unions to establish 50 more representative offices. Other goals include forming partnerships with retail brokers and bringing trust services to smaller credit unions. With the latter, a group of credit unions would share the services of one trust officer through MEMBERS Trust. There's also some early discussion underway on forming alliances with member business services operations. Registered representatives will also see more trust schools next year with training topics to cover issues surrounding families with children or relatives with special needs and expanded coverage of retirement and investment management. "Retirement comes likes a thief in the night," Walker said. "We have to wake up Baby Boomers to the fact that there's going to be a need to plan for their estate, their children, and their businesses." -

[email protected]