CREDIT UNIONS
IN RECENT YEARS credit unions have beefed up their services to compete better with banks. One notable addition is that of an on-site financial adviser.
Big-city credit unions tapped the financial advisory services market about a decade ago. Small-town credit unions are increasingly following suit as they court baby boomers near retirement and, soon, small-business owners.
Rather than hire financial advisers, many small credit unions are contracting them through third-party broker dealers or credit union networking organizations. Doing so keeps down their costs, and takes away the burden of having to train an employee.
Last October, Accentra Credit Union in Austin, formerly Hormel Foods, employee credit union brought in a third-party financial adviser.
“We saw that was an unmet need for us,” says Aaron DeJong, vice president of sales and business development with Accentra.
Members asking for financial advice over the years had instead been directed to outside companies. There was no official referral system. In many cases, employees simply recommended firms with which they conducted their own personal business.
“If we don’t offer investment services,” DeJong says the firm realized, “members are going to go get it someplace else.”
Capturing referrals
Tired of watching assets walk out the door to be invested with other unrelated financial institutions, DeJong and his staff decided to take action. Through a trade show, the credit union connected with Financial Network Investment Corp., an ING subsidiary.
The broker-dealer has registered reps throughout the country. About 25 percent of reps work within banks and credit unions, says Phil Margolis, a spokesman for ING U.S. Financial Services, based in Hartford, Connecticut.
Credit unions find the company attractive because advisers aren’t beholden to certain products, DeJong says. While similar companies award bigger commissions to reps who sell proprietary funds, Financial Network allows advisers to sell any and all products including stocks, bonds, mutual funds, annuities and insurance products that have passed its due diligence tests.
That kind of independence, says DeJong, fits the credit union credo of keeping members’ best interests in mind.
“As a credit union, I’m not as much interested in getting a loan on the books as I am making sure [a member] is financially healthy and strong.”
The company vetted several candidates. Accentra eventually settled on Jay Braaten, an 11-year veteran in the industry.
Braaten offices right out of the credit union building. He?s positioned in the middle of the credit union?s member services and lending area ? the optimal location for capturing the attention of potential clients.
“His office is right next to somebody who?s done CDs and loans for the last 20 years,” says DeJong.
He keeps regular office hours; mirroring the schedules of regular credit union employees ensures he captures the most referrals. Employees have been trained to identify members who may have some investment needs.
Inheritance, marriages, births and other life-changing events often trigger a member?s involvement with Braaten.
“I used to spend about 80 percent of my time prospecting, seeking out new clients and new business. That didn’t leave a lot of time to focus on my clients,” says Braaten. “Now it’s the complete opposite.”
He estimates about 10 percent of his time is spent prospecting. Instead, credit union staff is the main engine generating sales leads.
Freed from regulations that once severely limited the scope of their membership, Accentra like many other credit unions is positioning itself to serve the small-business market. A financial adviser, says DeJong, can be the cornerstone for building a program that attracts and serves these clients.
“As we continue to grow our services, we are going to move more into commercial services. Jay will be able to provide some things in terms of 401(k) plan administration and other things,” DeJong says.
“There’s a good fit there. But we’re not there yet.”
Comfort level
Maintaining a physical presence adds credibility and builds trust among credit union members, says Braaten. He’s treated like one of the staff, so members feel at ease approaching him.
That comfort level, however, has taken time to foster.
Braaten used to meet with prospective clients at least three times before they would sign for an investment. Now that they?ve gotten acquainted with him and have become accustomed to his presence at the credit union, they tend to make decisions right away.
“Once you get that relationship established, they keep coming in,” he says.
Another Financial Network rep, Dean Bertsch, is a third-party financial adviser who?s worked with St. Cloud Federal Credit Union for half a decade. His book of business has grown as the years have passed. Bertsch manages $14 million in investment assets for credit union members. About 200 members are clients, though he may meet with each only once a year.
“I think the credibility factor has gotten much more prominent. People see that I’m here to stay,” says Bertsch.
“Ninety percent of business comes from people seeing my face at the office and understanding what I do. That didn’t happen overnight.”
Like Braaten, his office is located at the credit union, near its main entrance and exit. Members are free to walk over whenever they please.
Credit unions, he says, are following a trend for all financial institutions ?to be more full-service than ever before.?
Yet credit unions need to stick close to their populist roots, officials say, which is why picking a trustworthy rep is critical.
Braaten says he picks up between $500,000 and $600,000 in assets a month from credit union members. He’s adding at least three to four customers a week above expectations and ahead of benchmarks set by his company.
The average sale ranges between $30,000 and $40,000.
He can charge a fee for consulting or a trade in a financial plan. He also maintains a book of business separate from the credit union.
Initially, DeJong was concerned that a rep would sap credit union deposits, or spark a runoff of CDs or savings. That’s not been the case, he says.
In fact, the effect has been overwhelmingly positive. It?s a winning relationship for all parties involved, says DeJong. The credit union gains a new revenue stream, as it grabs a piece of each of Braaten?s sales. Financial Network sets the percentage upfront, though it slides a little as sales in the portfolio grow.
“It’s additional off-balance-sheet income a credit union can generate while still adding a service to members,” DeJong says.
Braaten himself is commissioned. He works virtually expense-free, however. The credit union picks up the tab for his office rent.
To draw new business as well as provide helpful free advice Braaten has begun to host semiannual outreach events. Twenty-five people showed up for his latest a seminar on retirement planning in April. About half of his attendees, he says, ended up booking appointments afterwards.
[contact] Jay Braaten, Aaron DeJong, Accentra Credit Union: 507.433.1829; ask@accentracu.org ; www.accentracu.org. Dean Bertsch, St. Cloud Federal Credit Union: 320.252.2634; info@stcloudfcu.coop; www.stcloudfcu.coop. Phil Margolis, Financial Network Investment Corp.: 860.723.4783; phil.margolis@us.ing.com; www.financialnetwork.com
