Stockwalk.com CEO says online investing is becoming a killer app for member retention

MINNEAPOLIS - In this Internet investing era, credit unions that want to become their members' first choice for investments are going to have to do much more than just offer high yield money market accounts and CDs from the teller line. The `90s was the decade of the individual investor. The days of investors relying on high-priced stock brokers and financial planners are over. Stock brokers used to be viewed as treasure chests of Wall Street information, and many are, but thanks to the Internet much of that information has been disseminated to millions of consumers. From thestreet.com to wallstreetcity.com, surfers don't have to look far for company research tools. But all of those personal finance sites have something else in common-most of them carry banner ads and links to popular online trading sites such as E*Trade, Ameritrade and Datek. And while stocks aren't a core credit union product, many industry analysts believe credit unions need to offer members stocks to keep their other relationships going. In fact, a recent Card Services for Credit Unions' cardholder survey found that online investing was one of the three most desired products among members surveyed, yet only 14% of the credit unions surveyed offered it. A CUNA/PSI Global study found that 55% of CU members are online, compared to 37% of nonmembers. But the Net-savvy of CU members can actually be a bad thing if credit unions don't offer them their own online investing options, said Bob Vosburgh, CEO of Stockwalk.com's private label unit. "Credit unions have the option to put E*Trade links on their sites to show members the way to online trading, but the silly thing is when the member clicks on that E*Trade link they could be gone forever," said Vosburgh. While "forever" may be a bit strong, Vosburgh said the fact that many online trading firms now own banking subsidiaries (such as E*Trade's Telebank) there's a chance members could start doing more than just investing with these firms. Vosburgh said Stockwalk.com has tried to find a solution for credit unions to "ease the pain in competing with super-sized banks' investment options." Stockwalk.com, which has signed six "large" credit unions, according to Vosburgh, gives members the ability to debit their share accounts to purchase stocks. "We have set it up in such a way so it's all debits and credits from the checking account," said Vosburgh, who described online trading as an "e-revenue" source for CUs. Members must still have a Stockwallk.com account virtue of SEC regulations, but money gets funneled into it from a member's share account at time of purchase. There are two versions of Stockwalk.com's services. One is the fully customized private label deal that lets the credit union personalize every page of Stockwalk.com's online investing solution. The other is by the credit union partnering with an online banking vendor Stockwalk.com has a relationship with. The Minneapolis-based firm has many relationships with popular CU Net banking vendors-Digital Insight and cavion.com to name a few. With that package the online investing solution is still customizable with the CU's logo and other branding information, but there are not as many customization options. However, Vosburgh said this solution does the job from a branding standpoint and is much more affordable than the private label deal. For both programs, members log on to their credit union and click on an investment link provided by Stockwalk.com. They are linked to the online trading component, which includes the CU's branding information. "It looks like they're still doing business with the credit union. And we don't really let them leave the credit union's site. There are no links to financial competitors," said Vosburgh. Of course members will see Stockwalk.com early on when they view an investment disclosure as mandated by the SEC and the National Association of Securities Dealers. Despite the E*Trades of the world, Vosburgh believes credit unions have an advantage with online investing. "E*Trade was great for the early adopters, but we're seeing a move back to clicks and mortar. People want to know they can go down the street to their credit union if they have any problems," said Vosburgh. Stockwalk.com provides CUs with full-service member trading call center support. "We have someone answer the phone in a generic bent for trading support. The beauty of the whole thing is if they get frustrated they can complain to their favorite teller and the credit union can let us know." While Vosburgh said Stockwalk.com does everything to prevent the credit union from having to field investor complaints, he said just that local option to do so may give members an extra level of comfort. Stockwalk.com charges users $18.95 a trade. To open an account members need $2,000. Vosburgh said the company set it at $2,000 because of research that shows investors with less than that tend "to bleed their accounts with a lot of trades." "The top 19% of the accounts usually end up being the only positive flow to the bottomline," said Vosburgh. But for a limited time Stockwalk.com is reducing the account minimum to $500. Vosburgh would not say how much revenue CUs see from trades, but said each member's trade will bring a percentage back to the CU. Stockwalk.com Group is the parent company of MJK Holdings Inc., which owns Miller, Johnson & Kuehn, a 20-year old full service brokerage firm. For more information visit www.stockwalk.com. -pgentile@cutimes.com