Nearly seven years ago, changes to Coastal Federal Credit Union's investment program were put in place to help build a stronger presence with members, many of whom had long-time ties to IBM, the cooperative's original sponsor.
From the creation of a financial advisory center dedicated solely to investment and trust services to a shift from a managed employee to a dual employee model, the $2 billion Coastal in Raleigh, N.C., grew its investment portfolio to $150 million in assets under management.
For many credit unions, that dollar amount would be celebrated given the reality that investment services continue to have a small penetration with members, according to industry statistics.
Marvin Jones, program manager and vice president of wealth management at Coastal, recognized just how much more room the credit union's investment program had to grow when he came aboard a little over a year ago.
"We have a sophisticated client base. We grew out of IBM. We're in the middle of Research Triangle Park, and there are a lot of universities and technology companies here," Jones said. "It looked like we were underachieving."
While the investment program's progress had made some steady strides since 2003, Jones didn't think the pace was happening quickly enough.
To help speed it up, Coastal spent a year and three months on a due diligence search to find the right partner. After meeting with five broker-dealers, Jones said it found the perfect match in CUSO Financial Services LP, a San Diego-based broker-dealer and registered investment advisory firm serving more than 135 credit unions.
The investment program operates under the Coastal Wealth Management banner. Jones said the conversion was completed Dec. 20. Members will have access to a broader lineup of products and services, including insurance, while CFS' Web-based account management system aims to help the program's overall goal of growing the wealth management department.
Coastal Wealth Management is made up of Jones, five advisers, one sales assistant, one financial planning specialist and one administrative assistant.
Jones said Coastal made the decision to end its relationship with a well-known industry provider, which he did not want to name.
"It was a very good organization. We just weren't a good fit for them," he explained.
Some of the obstacles Coastal's investment program faced were a lack of proper direction, a lack of the appropriate roles and an overlapping of efforts, Jones recalled when he was hired. The product lineup wasn't robust. While he doesn't think it was always the case in the past, the marketing department is now doing a stronger job of identifying candidates for wealth management, Jones added.
One of the reasons why it may have taken a long time to find a new partner was because Coastal is committed to offering nonproprietary products and services, and keeping salaried credit union employees rather than commissioned staff, Jones said. The CFS alliance made those conditions possible.
"Being salaried credit union employees allows us to focus on our members' financial betterment," Jones said. "CFS doesn't offer proprietary products and encourages advisers to choose whatever is best for our member."
At one point, gross dealer concessions earnings were between $800,000 and $950,000, Jones said. While it has since progressed to between $1 million and $2 million, Jones said given the credit union's size, the goal has been upped to the $2 million to $4 million range. The overall goal is to grow the wealth management program by at least $20 million each year.
While the program is looking to nurture Coastal's affluent member base, Jones stressed that unlike some investment banks, the credit union does not require clients to have a minimum amount of assets.
"If you only have $100 and just got out of college, we will help you," Jones said. "The vast majority of members is age 55 and up. But we service everyone."
To that end, an adviser was hired last year to work with less complex cases to ensure each member's needs were met regardless of the amount of assets they have.
Established in August 1967, the credit union was formed by eight IBM employees. In 1991, the field of membership was expanded to include employees of other businesses throughout Research Triangle and North Carolina. It now serves 190,000 members and operates 15 branches, including a network of 4,200 shared branches nationwide.
"The team at Coastal is very good at identifying their goals, and we look forward to helping them chart their course to achieve those goals," said Valorie Seyfert, CFS president/CEO.
The recession certainly took a toll on retirement and investment plans over the past few years. Jones said many of Coastal's clients still want their money to work for them so that they can retire comfortably. However, each individual has unique goals.
"There are multiple solutions that can dilute the risk people may want to take. Some people with money in deposit accounts had high yields that they used as income," Jones said. "When those yields went down, they took a cut in pay."
Some members are seeking products with guaranteed income, he pointed out. Time horizon can help tailor plans that includes risk assessment and overall financial goals. As a former executive on the retail management side of investments, Jones said the biggest difference in meeting members' needs is clear.
"The main question is always how will the services and products we offer impact the member. Being that our advisers are salaried employees and not biased–that's refreshing."
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