By Ray Birch
MADISON, Wis.—A big opportunity exists for credit unions to ramp up revenue and better serve members through wealth management services, says CUNA Mutual Group, which points out a significant number of people are preparing to move an even more significant amount of funds in the near future.
Credit unions should be paying attention now to the fact many members are itching to do more with some of the hot money sitting in low-interest transaction accounts, says Rob Comfort, president of CUNA Brokerage Services.
The insights are being shared at the same time some members of the Federal Reserve’s Open Market Committee have signaled they may be receptive to sooner than it forecast at the start of the year. Moreover, as CUToday.info reported, J.D. Power has just released new research findings showing financial advisory services are the “ultimate formula for customer engagement.”
“There is all this money that's sitting in credit unions and its red-hot money that's ready to flow out—this huge surplus in credit union deposits that we’re hearing so much about,” said Comfort. “You want credit unions to have the opportunity to redeploy some of those funds in more long-term investments. You don’t want those funds to just walk out the door when the yield curve changes. People are going to go somewhere with that money.”
But Comfort said an even bigger concern with credit unions now than the surplus deposits, which have negatively affected capital ratios, is the fact so many members are not being helped through wealth management services offered by credit unions.
‘Critical Statistic’
“When you look at the financial management side of the credit union industry, you see a very critical statistic,” said Comfort. “Only 2.2% of credit union members are using their credit union for wealth management services. And I estimate that out of all the credit unions in the United States, there is only about 1,000 that provide wealth management/financial planning services. That leaves thousands of credit unions offering no investment or financial planning guidance to their members.
That reality has led CUNA Mutual Group to pursue a new partnership with LPL Financial. The company said CUNA Brokerage Services (CBSI) will continue to work directly with credit unions and financial professionals but will also now leverage LPL’s integrated digital platform, streamlining the end-to-end experience for financial professionals and members. LPL will also provide back-end broker dealer/registered investment advisor (RIA) services, CUNA Mutual Group stated.
“By combining CUNA Mutual Group’s expertise in client experience and data-driven strategic consultation for credit unions and advisors with LPL’s leading platform, we will deliver an advisor and customer experience unique to the credit union industry,” said Comfort.
Rob Comfort
Seeking to Understand Members
Comfort explained the partnership with LPL will help CBSI work with credit unions to better understand the unique needs of their membership when it comes to wealth management, and help them convey the right message to their account holders.
“Through the use of data and analytics we will really learn how each credit union can best create awareness with its members and target members the right way,” he said. “Technology is going to play a big role here.”
Comfort said CUNA Mutual discussed building the digital tool and technology needed to accomplish the task itself, before deciding against it.
“But then we said we don't have two or three years; we want address this now,” said Comfort. “So, we then diligently sought strategic partners and came to the conclusion that LPL Financial was the right partner. We not only looked at LPL’s existing offerings, but we also looked at their roadmap—where they are going over the next one to three years.”
Virtual, But…
According to Comfort, CBSI will be offering credit unions access to “virtual advisors” as a means to extend a CU’s capabilities and reach more members. He said he believes the virtual advisors will always require some sort of human interaction, and in the coming year that will be via video connections.
“Data has always shown that people, when it comes to managing larger sums of money, prefer to speak with a person,” Comfort explained.
But that does not mean AI won’t be part of the process, Comfort clarified. He said CBSI will make greater use of data analytics and combine that with AI to best determine the wealth management needs of each credit union’s members, how they like to be communicated with, and more.
The company will also launch a new brand in the coming months—CUNA Mutual Group Financial Advisors. CBSI has grown from 400 advisors in 2017 to more than 550 advisors currently, across approximately 300 credit unions, managing more than $36 billion in assets. CBSI will continue to distribute annuity products.
Help is Needed
But having enough credit unions helping members with their financial planning and investment needs has been a problem that Comfort contends the industry has been kicking down the road.
“Credit union members need help,” he said. “We're committed to this business and our philosophy is if we can build something, if we can buy something, if we can partner with somebody to create a better experience for members we simply do that.”