New data from Kehrer Bielan Research & Consulting showed credit unions have work to do when it comes to attracting more retail investing customers. However, it's worth the effort, given that the study also shows a successful retail investment program can yield something far more valuable than extra fee income: Loyalty.
Only about 10% of people say they would consult a credit union about investing a $25,000 windfall, but people who do end up buying investments at their primary financial institutions are far more likely to have higher deposit and savings balances, have more asset management accounts, and are more likely to say they won't switch financial institutions, according to the study.
In fact, loyalty goes up 42% when a member buys an insurance or investment product through a credit union, David Foster, who is vice president of wealth management at CUNA Mutual Group, pointed out.
Fear that attracting retail investment money could cannibalize deposit and savings inflows is understandable but unnecessary, said Jim McCrudden, vice president of insurance and investment services at Citadel Credit Union, which has $2.1 billion in assets and about $500 million under management. 'We did about $110 million in investment last year," he explained. "Almost 90% of that came from outside of the credit union."
That's huge for an industry whose members, according to Filene, average age 47 — past their peak borrowing years.
"If I don't get their retirement account when they set it up to fund their retirement, I don't get that rollover," Kevin Mummau, executive vice president of CUSO Financial Services, explained. "Let's say it goes to Fidelity. Pretty soon they're not going to want to use my checking either because it's a lot more convenient to have what's flowing out of my retirement account go into my checking account at Fidelity for all my cash flow purposes. They're not going to need or want me anymore."
"They're not using as much of the traditional lending products," Foster added. "Here's a way for them to maintain loyalty and serve them with products and services that they need, which is that financial and investment and income planning pre-retirement and then into retirement. It helps them make a nonprofitable member much more profitable."
But it's not just the dollars and cents that retail investment brings to the bottom line, Mummau said.
"It always bears out that there's a lot of soft value to it," he said.
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