By Ray Birch
MADISON, Wis.—The blame is squarely on the shoulders of credit unions if they don’t step up now to offer targeted financial education and services to help the struggling segments of their membership that will be hurt most by an economic downturn, says Maurice Smith.
The CEO of $3.4-billion Local Government FCU in Raleigh, N.C., threw down that gauntlet during a recent Filene Research Institute webinar on financial well-being.
“It doesn't require a lot of imagination to figure out who's going to get hurt in this next downturn, and we know another one's coming,” said Smith. “Shame on us as credit union cooperatives if we're going to march into another financial downturn and let the same communities get hurt. We already know who has the bull's eye on their backs.”
Smith’s words come at the same time CUToday.info has embarked on a series of articles focused on how rapidly changing economic factors, especially fast-rising prices, are changing what many members now need from their credit unions regarding financial education and possibly services.
‘Chip on my Shoulder’
“If it sounds like I have a chip on my shoulder about this, I do. This is my 43rd year in credit unions, and in my career I have seen five recessions. Now, I'm retiring at the end of the year. So, if (Fed Chairman Jerome) Mr. Powell was right, I won't see my sixth recession before I get out of here,” said Smith. “We absolutely know who gets hurt in recessions and economic downturns. It's the same communities, the same members, the same kind of folks who were hurt in the last recession.”
Smith said there are now many worried conversations taking place around families’ kitchen tables.
“Members are sitting around at 9 o'clock at night trying to decide how they are going to prepare for retirement, save money for their children's education, put food on the table, buy a tank of gas…,” said Smith. “These kind of conversations are happening all over this country.”
Smith said it is important for credit unions to do more than show concern about how inflation and other factors are increasingly cutting into family incomes and affecting their plans.
‘Do Something!”
“We need to actually do something. You can’t just offer rhetoric that we are concerned,” Smith said, before throwing down a challenge. “We actually are going to do have to something about it. Go ahead, knock this chip off my shoulder and all say we’re going to do something about this once and for all.”
What CUs can do, said Smith, who was part of a panel group during the webinar, is better understand the needs of their members today to provide the right kind of financial education and assistance.
“I just had a conversation with a member who said, ‘I expect you to warn me If I'm going over a financial waterfall. You have all this information about me in your database…,’” said Smith. “We know which members get in trouble. We have statistics, to prove it. You likely have insight when a household, is getting in trouble. So, if I'm about to get in trouble, I would expect my credit union to tap me on the shoulder and give me some help and set me in the right direction. If members are expecting us to rescue them if they get in financial trouble, well, by golly, we ought to have a commitment to do something about that.”
Digging Into the Data
Chuck Purvis, CEO of $4.7-billion Coastal CU, Raleigh, N.C., who was also on the panel group, agreed with Smith.
“We have so much data on members. We know where they're spending money. We know how much money they're spending—whether it's debit cards, credit cards... We know if their balances are going up,” said Purvis. “Be proactive and help, and as Maurice said, help keep them from going over the financial waterfall.”
Purvis acknowledged is not simple to piece together all those data points in order to get a picture of who exactly needs help—or will need help.
“It's scattered all over the place. It's in different databases, and then with different providers. But, ultimately, that data is a powerful tool,” he said. “It's a learning tool to ultimately create this holistic picture of each member, and be able to understand their financial health and use that data to drive everything from offers we make to them to communications, such as alerts. The technology is there. It’s now up to us.”
‘The Need…is Real’
Taylor Nelms, senior director of research at Filene, pointed to data from the Financial Health Network that reveals the majority of Americans are still either financially vulnerable or simply coping.
“The need for financial well-being support for consumers and households is real,” he said. “That same data also show that 80% of consumers expect their primary financial services provider to support their financial well-being. However, only 14% agree strongly their current PFI actually does that.”
In addition to helping struggling members, taking action to prevent financial problems within families also helps the credit union, according to Nelms.
“Consumers who say their PFI helps them improve their financial health are three times more likely to be very satisfied with their PFI, three times more likely to recommend their PFI to others and two times more likely to stay with their PFI over the next five years. And, they are five times more likely to say they are interested in purchasing additional products and services from their PFI.”
Gigi Hyland, executive director for the National Credit Union Foundation, emphasized efforts to help members must be “longitudinal.”
“This is not one product. This is not one service. This is not one program,” she said. “It’s really from the board meetings all the way down to the frontline staff, and how they interact with me as a credit union member, and everything in between, including product design.”
Hyland noted the Foundation, for instance, offers a Quick Start Guide for “Putting Financial Well-Being for All into Practice.” The guide focuses shares four steps on how to help members improve their financial situations.
Examples Shared
“There are lots of examples in this Quick Start. Guide. There are lots of examples of on The Foundation’s website about credit unions that are doing this work,” Hyland explained. “First and foremost, you need to really understand who your members are. You have look at them demographically, at who they are and what they're going through. You can use something like the Financial Health Network’s assessment tool, which is free. Or contract with a vendor to do an assessment—actually gauge what percentage of your members are healthy, what percentage of your members are coping, and what percentage of your members are struggling.
“Then, you are more able to design products and services and to do your outreach, counseling or coaching… All of this is pretty low-hanging fruit and probably doesn't cost a lot of money,” Hyland continued. “This is in your DNA. This is who you are already. This is not a 180-degree shift to something completely different—something that's bright, shiny, and new. This is who you are.”