Iowa League joins other CU industry pioneers seeking CU trust service powers

DES MOINES, Iowa-Trust services traditionally have not been a widespread credit union industry offering, but every so often a certain amount of interest crops up. The Iowa Credit Union League is hearing rumblings of interest from some credit unions in the state. This isn't surprising at a time when savings rates are down. Consumers are seeking out financial services for advice in investing and protecting assets and trust services have become increasingly desirable In Iowa so far, though, getting things changed will take some doing. "We've found that federally chartered credit unions can operate credit unions service organizations (CUSOs) to offer trust services," said Julie Andersen, vice president of government affairs at the Iowa Credit Union League. "What we're suggesting in Iowa... (a state that is 99% state-chartered credit unions) is that we'd like to see parity with federal law and see (state-level) legislation passed that would allow state-chartered CU's CUSOs to offer trust powers." With the Iowa legislature now in session, Andersen is working to try to convince lawmakers that the time has come for a change in the law. "We have a bill that is going to be introduced in the Senate, and we're working on getting a bill introduced in the House," Andersen said. "It's still pretty early in the process." In Iowa at the present time, CUs have just a 6% shared of combined assets of banks and CUs, not a large share, Andersen noted. At this point, Iowa banks are the only entities offering trust services for consumers. Generally banks are offering these types of services to consumers who have average trusts of $1 million, she said. Tied into this issue, Andersen explained, is the move in Iowa to raise the bank deposit cap. "They (lawmakers) are raising the deposit cap on banks, which means that the percentage of assets that any one bank can hold in comparison to any other bank is being raised from 10 to 15%," Andersen said. "So as the banking industry gets more concentrated, there will be fewer for customers to obtain trust services and this especially pertains to trust customers with modest means. "So, we're asking for the authority to provide trust services as well." This is an area that credit unions would be wise to address as quickly as possible, advises Bob Dorsa, president/CEO of the National Association of Credit Union Service Organization (NACUSO). At a time when so-called Baby Boomers are inheriting sometimes surprisingly high assets from parents, and looking at the same time for ways to protect them so they can someday hand them along to Generation X children, trust services are increasingly sought. "It all gets back to this wealth accumulation that we are seeing," Dorsa notes. "Many of that generation (who now are seeking trust services), through their hard work, accumulated a lot of assets, and not all necessarily through Wall Street... "The one thing where there seems to be some consensus is that the make-up or distribution (of where people are putting their assets) is changing, and that's where it gets down to the credit unions level," he said. One financial services professional that he talks to has said that deposits in most financial institutions are either flat or in a downturn. "Credit unions have gained a little bit, but that was in the `90s, as some of the run-off that came out of the thrifts' dissolution... Certificates of deposit are pretty much becoming a dinosaur, let alone regular savings, which are the backbone of the credit union system relative to where the funds come from and the cost of capital. Many of these things all point to trust services," Dorsa noted. So far, there are only five or six major CUSOs dealing with trusts serving federally chartered credit unions nationwide, Dorsa said. NACUSO currently is working with NCUA in an attempt to get rules changed so that federally chartered credit unions could offer trust services directly, instead of having to do it through a CUSO. In Tampa, Fla., where Suncoast Schools Federal Credit Union officials are among the industry's pioneers in offering trust services to members, they first began talking about doing it in the mid-'80s. They actually began doing it in 1987, according to Ed Baranowski, president/CEO at Fairwinds Federal Credit Union in Orlando. "It started (for us here in Florida) over at Suncoast when single school teachers wanted someone to manage their finances because they didn't have family," Baranowski said. "When these members went to the banks, they found that the rates were high. There was a minimum annual charge. So, this was our credit unions' response to a need." Suncoast Schools Federal Credit Union in Tampa and Fairwinds FCU now work cooperatively to offer their members trust services. "What we did was purchase an interest in Members' Trust Company of Tampa, and that is owned primarily by Suncoast Schools Federal Credit Union," Baranowski explained. "So they (Suncoast Schools) have made the major investment as a Florida corporation. They have the trust officer... (registered trust officers must go through training). We have trust counselors here at Fairwinds. "We can visit with members and do the preliminary work, but the trust would then be referred to Members' Trust in Tampa," Baranowski said. "We have more than 800 trust accounts where members have deposited the funds and designated them that way, but we are not currently administering any trusts, which is where the trust business grows." About six to eight months ago, officials from a California credit union who were looking into how to go about offering members trust services visited to take a look at what Suncoast and Fairwinds had set up. They are among the most recent to get into trust services for members offered through a CUSO, said both Baranowski and Dorsa. It involves quite a bit of money, and it's a service that members want and need, Dorsa points out. The sooner everyone realizes that, the better, he said. "There's been a great proliferation of CUSOs in the last 10 years set up for investment activities," he said, citing Patriot Federal Credit Union in Chambersburg, Penn., as one of the leading-edge FCUs that fairly recently has start a trust services CUSO. "They had a five-year business plan. They attained their five-year business goal in 18 months. And the assets of the CUSO have already exceeded the assets of the credit union!" Dorsa said. -lide@cutimes.com