TUCSON, Ariz. -- Financial planning has taken on several different meanings over the past few years as retirees are living longer and trillions of dollars of wealth are poised to pass between generations over the next decade.
A 2003 survey conducted by the Opinion Research Corporation International showed that 86% of those surveyed felt financial planning was important, but only 46% had actually developed a plan.
"There are hundreds of credit unions around the country selling mutual funds and annuities and calling it a 'financial planning' program," said Mike Prior, president/CEO of the Credit Union Financial Network, a Phoenix-based investment CUSO owned by several Arizona credit unions. The underlying question for advisers should be "how would we want our families treated--what are their needs, goals and risks. Products are secondary."
Indeed, of the 11,000 members who responded to a July 2006 online survey from Callahan's Internet Strategy Consortium, 63% said they would likely use the credit union for future financial planning needs. The downside is only 6% of the 51% of those surveyed that met with a financial planner or adviser did so through their credit union. Randy Baldwin, president/CEO of $148 million Tucson Old Pueblo Credit Union, said members are smart and can tell when products are being pushed on them.
"It doesn't make sense to sell products before [having a financial planning strategy in place]," Baldwin said. "It's putting the cart before the horse. We want to meet members at every life cycle."
The credit union uses a former Merrill Lynch adviser through CUFN to bring financial planning to members, Baldwin said. Having quality advisers is among the first steps to ensuring that members are getting their needs met and building a trusted rapport, Prior added. But there is still a mindset in the industry that a true financial planning program can be expensive and cumbersome.
"The model is tough," Prior said. "When you do more financial planning, you want to drive down costs for members and shrink your margins. You're trying to split 1% between the credit union and a broker and some credit unions are paying big salaries and small commissions. The problem here is you generate enough revenue to keep advisers but you might lose that [with a financial planning program]." Baldwin ensures that TOPCU's staff is kept up to speed on financial education. One testament to their knowledge is that 100% of the credit union's employees are enrolled in TOPCU's 401(k) program. Meanwhile, with the spotlight centered on the first wave of baby boomers who retired last year, both banks and credit unions are seeing renewed interest in setting up long-term care either through assisted living facilities or other means. Prior said he recently sent out a memo to CUFN advisers on asset protection and strategies on long-term care as well as trust services.
"Eighty percent of a credit union's deposits are typically with 20% of its members and they tend to be older," Prior pointed out. "The focus is on how to protect assets for loyal, long-time members."
Even though banks may have the jump on credit unions when it comes to financial planning programs, few actually provide those that offer integrated guidance, according to a 2005 study from SEI Investments. The survey of 21 wealth-management executives at banks revealed 52% said they thought they differentiated their services by supplying comprehensive advice. However, respondents most often mentioned traditional topics such as estate and financial planning when asked what their customers ask advice about. Sixty-two percent said technology is the largest obstacle to a fully integrated advice offering.
Over the past three years, financial solutions such as separately managed accounts, exchange traded funds and institutional money managers are being talked about more, Prior said. CUNA Mutual Group's eight-year old managed account program, for instance, topped the $1 billion mark in 2006.
Prior said looking beyond products, time frames and returns, the most valuable asset to members when it comes to financial planning is hiring the right adviser. Baldwin said the credit union would rather spend five to six months finding the right person than bring someone on who doesn't understand the credit union model.
"You have to ask the right questions," Prior said. "There are a lot of licensed people but not too many of them understand the [credit union] philosophy." --firstname.lastname@example.org