For so many years the manner in which products and services delivered by credit unions to members was based on whether or not they were "core" or "incidental" to the business of credit unions. If a credit union desired to earn income in excess of their actual expense they were required to deliver and operate these "incidental" products and services through a CUSO (credit union service organization). Then, in 2001, two separate and independent regulatory changes became effective which had a significant impact on the delivery by credit unions of retail investment services to its members. First, as the result of GLB, the SEC revisited whether or not a non-NASD Registered Broker Dealer financial institution subsidiary could receive the net income that resulted from the sale of investments and securities to its members. Second, the NCUA, independent of the SEC and GLB, passed Incidental Powers. As a result, credit unions were no longer required to deliver retail investment services through a CUSO structure. They would in fact be required to move this business directly into the credit union from the CUSO. Now that we are well into 2006, let's take a look at the impact that this deregulation has had on credit unions in terms of first making the shift itself and second, adjusting to the new operating model that would have to be put in place. Making this shift resulted in hard dollar expenditures as well as significant cross departmental staff meeting time to uncover all of the "moving parts." It has been reported by many that this process was actually disruptive for many programs and impacted the current level of productivity and performance. As the overall legal structure and governance model had to be overhauled, tantamount to closing out one company (the CUSO) and merging it into another entity (the Credit Union), the legal bills deducted from "our member's money" resulted in unbudgeted expenses. From another perspective, this certainly represented a clear revenue opportunity for those attorneys that have served credit unions so well during the past. While in the CUSO, the investment service program had a comprehensive chart of accounts as a separate company. This enabled the CUSO to measure and analyze its overall operation from numerous perspectives with an emphasis on the tracking of expense ratios and gross margin management. As previously noted, the larger CUSO's took this step quite seriously recognizing what was at stake for them. It was imperative that when all was said and done with the program back in the credit union that they could still measure and benchmark its productivity with its peers. For a number of programs, primarily the smaller ones, a much simpler route was taken which resulted in the dilution of what in fact could be measured and tracked on an on-going basis. Going forward, this is where credit unions will need to invest additional time when they finally realize that they will need to account for all of the moving parts more comprehensively. I would venture a guess that if credit union CEOs were asked what their gross margins are on their investment programs – as measured by the industry and prior to the parent's overhead allocation being cost centered to the program – that they may not know or have an incorrectly computed metric. As spreads continue to thin everywhere and the sense of urgency to shift more dollars to the bottom line either through non-interest fee income or direct expense reduction, the contribution that an investment program can make to its parent credit union will become more and more critical. As the business culture and best practices are different for a brokerage entity as compared to a financial institution, a significant learning curve needed to be overcome on the credit union side so as to ensure the same levels of performance and productivity for the investment services program. As noted previously, there are business modeling and best practice differences between brokerage operations and credit union operations. These certainly carry over to the HR area with the additional dynamic related to the cultural differences between these two business channels. Brokerage compensation plans are built, benchmarked and administered quite differently as compared to those in the credit union, requiring the credit union's HR Department to expand their base of knowledge in this area. For many, this was seen as an additional set of tasks. Risk Management/ Liability Review/ Contracting Of the simpler components to complete and check off, the contracted broker/dealers were required to put in place contractual agreements directly with the credit union rather than the CUSO. All CUSO liability coverages had to be rewritten with the credit union's current carrier in direct relation to the "new risk" associated with the program now being on the credit union side rather than the CUSO. Credit Unions certainly acknowledged that the assets of the credit union were now directly exposed as a result of this shift. All in all, and as an industry, all of us in credit union land are getting there. However, we have quite a bit of work to do in making up for lost productivity and performance as well as more effectively integrating this business channel into our overall product offering to our members. In the months to come our investment programs will be reviewed with an eye towards performing at industry benchmarked levels. For those that are not yet there, or were prior to "the shift," they will need to get there as we owe it to our members.