While credit unions weathered the recession better than large banks, they are searching for new sources of revenue to counterbalance slow loan business and potential losses on the debit card side resulting from the interchange fee cap. Deepening relationships with their mass affluent members by offering investment and insurance products is one important revenue growth strategy that more and more credit unions are pursuing.
Until recently, only 50% of the top 100 credit unions offered investment solutions to their members. Further, a 2009 Aite Group study of 90 U.S. credit unions of various sizes showed that only a quarter of the sample was offering investment solutions. Those that offer investments are now more focused on growing investment sales than in the past and are working with their broker-dealer partners to attract a larger share of their members' investment assets. According to Kevin Mummau, executive vice president for program development at CUSO Financial Services LP, a broker-dealer that caters exclusively to credit unions, "Credit unions have only scratched the surface of the opportunity. Currently, our advisors are managing an average of 20 cents in investments for every dollar of deposits." Mr. Mummau thinks this number should be at least at 50 cents for every deposit dollar. His best-performing credit union customers have reached $1 in investments for each $1 in deposits.
The credit union industry is in the beginning stages of catering to mass-affluent members' long-term financial goals. Fortunately, credit unions already have several of the capabilities that are important for doing well in this area.
Recommended For You
CUs are member-focused and spend a lot of time and effort thinking about how to enhance the member experience across channels.
They also invest in educating their members on important financial topics through seminars and, more frequently, e-mail newsletters, websites and blogs.
While credit unions have the interpersonal skills and educational focus that are essential for uncovering member needs and conveying how credit unions can meet these needs, they have faced challenges with leveraging these capabilities to sell financial advice and investment products. Broker-dealer firms that work with credit unions agree that it all starts with credit union leaders, who must continuously reinforce the importance of the relationship deepening strategy with branch staff members. In addition to visible leadership commitment, PrimeVest national sales manager LeAnn McCool cites the importance of educating staff members on the potential investment and insurance needs of their members. Ms. McCool suggests that branch staff members promote and attend financial adviser seminars to better understand what advisers can do for clients.
Ultimately, however, branch staff members are more comfortable providing a service than making a sale. Thus, leveraging this core service competency is likely to be a more effective strategy than changing the DNA of the staff member. Several credit unions are arming branch staff with educational guides to hand new members while they wait for accounts to open, for example. This allows credit union staff members to provide a value-added service to clients rather than pushing another product.
Once members become financial adviser clients, it becomes the responsibility of the financial adviser to retain that member by helping them with their lifetime of financial decisions. Most credit unions outsource this work to third-party broker-dealers whose financial advisers are equipped with financial planning tools and access to a broad selection of investment and insurance products, including fee-based solutions.
While credit unions prefer to outsource rather than to build investment and insurance solution capabilities in-house, they like to retain some control over the financial adviser. As a result, most credit union financial advisers are dual employees of the bank and the broker-dealer. This allows credit unions more control over how advisers are assigned to clients. In some cases, credit unions will pair their more experienced financial advisers with their more affluent clients to ensure the advice and products offered are a good match for their complex needs.
In addition to in-branch sales and service processes, credit unions need to think about offering investment and insurance capabilities through virtual channels to appeal to members who are unable or unwilling to visit the branch. Most of the third-party broker-dealers that provide investment and insurance solutions to credit unions offer a self-directed option. In addition, many credit unions that cater to members who spend significant time away from home (such as military and airline credit unions) allow members to speak with financial advisers over the phone. One airline credit union, for example, developed a phone center called "Rep on Demand" offered through an investment management firm. This service allows airline staff to access financial advice any time, and the center is also the investment and insurance solution for credit union branches located in less-affluent regions.
Similarly to bank-affiliated broker-dealers, credit union financial advisers do not view self-directed investing tools as a complementary fit with their services. Self-directed investing is perceived to be a channel that is good for do-it-yourselfers or investors who will never become financial-adviser clients. As a result, current self- directed solutions are minimalistic. This may be fine for baby boomers, but may steer Generation Yers away from credit unions and banks and toward online brokerage firms.
Sophie Schmitt is senior analyst at Aite Group.
Contact 617-338-6002 or [email protected]
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
