PSECU Transforms Philosophy, Role of Advisers as Investment Program Blossoms
HARRISBURG, Pa. -- To make PSECU's investment program a viable, integrated piece of the credit union's lineup that would really appeal to members, a number of shifts on several fronts had to take place.
With more than 70 years of history, the $2.9 billion PSECU, Pennsylvania's largest credit union, clearly had cemented a presence throughout the state. For a financial institution its size, it has been heralded as an innovator because PSECU is completely branchless. Members are either served online, through call centers, ATMs or via other virtual arrangements. Indeed, a "Go Branchless" advertising campaign launched in 2007 aimed to woo bank customers to consider alternatives.
In spite of its innovations, PSECU's investment program crept along, viewed more of as an afterthought that was not fully linked to the credit union.
"The program was in place for about five or six years and was very unsuccessful," said Steve Franke, program manager of PSECU Financial Services, who came aboard in 2002. "It was in part, due to the philosophy. There was more of a wirehouse mentality."
The decision to revamp the program came in 2002, when PSECU partnered with CUSO Financial Services LP, a broker-dealer and registered investment advisory firm. Franke described it as "one of the best decisions" the credit union has made. CFS recalled the program's model as an "add-on" service.
"It was more of a defensive mechanism against banks," said Steve Hollenbeck, senior vice president of marketing for CFS. "Before CFS, it was 'let us do it, get it out of the way, and we'll send you a check at the end of the month.' Part of it was the credit union was tired of having this type of program."
To that end, PSECU, working with CFS, set out to bring in more financial advisers and develop a holistic approach to financial planning. A member's big financial picture became the focus rather than peddling a product here and a service there. Franke was hired shortly after the CFS alliance and PSECU's assets under management went from $25 million in its first year to $250 million today. The program has grown 60% each year since 2002, Franke said. The philosophy shifts are paying off. PSECU recently received the Award of Excellence for Program of the Year among community-based financial institutions from the Bank Insurance & Securities Association--only the third credit union to do so in the award's seven-year history.
"When I got here, [the program] was listed under a CUSO and had never shown a profit," Franke recalled. "We were going into a hole. We were able to turn the program around in a matter of a few months." Franke cautioned that before any institutional changes are made, it is critical to have the support of senior management.
One of the vehicles that helped to create broader awareness of PSECU's investment program came through the roll out of a mobile office in 2004. The van crisscrossed the state so that members could meet with financial advisers. Franke said the van, which was emblazoned with the PSECU logo and other colorful visuals, caught the attention of many including toll workers who instantly recognized their credit union.
Ready to move in another direction, with the mobile office "[having] served its purpose," PSECU's strategic plan now is to set up financial services offices throughout Pennsylvania. In April 2007, the credit union weighed buying more vans or setting up centers where members could meet for their investment, financial planning and retirement advice. The financial services offices were the stronger option, and PSECU is in the process of setting up several in eight regions. So far, offices have opened in Harrisburg and Erie, with Pittsburgh and Philadelphia next on the schedule.
"When we started the mobile office, there was a need for this," Franke said. "I wouldn't say there isn't a place for it now, but we're looking at our strategic plans."
The mobile office is one way PSECU is hoping to increase its penetration. Franke said financial services are used by less than one and one-half percent of the credit union's 385,000 member base. While the gamut is served, those in the 40 to 45 age range and beyond are the main focus, he pointed out. Estate planning is a growing area as is life insurance needs for younger members. In 2003, PSECU beefed up its education workshops with retirement and long-term care bringing out larger than usual attendance. PSECU has asked Franke to put together an estate planning workshop for the credit union's employees.
Given the flux the nation's economy is in with the ongoing fallout from the subprime mortgage crash and rising gas prices, members are turning more to PSECU simply because they're confused.
"They're saying 'what do I do and who do I talk to,'" Franke said. "We're in a really good position to say that 'with that potential job loss, it may be time to refinance.' Or, people are planning to retire within two to five years. We're seeing a lot of the same concerns as before but now we're taking a holistic view."
Continuing with its one-stop shopping goal, PSECU is in the early stages of looking at trust services and looking to add property and casualty insurance.
In addition to a shift in philosophy, unsolicited r?(C)sum?(C)s are now a common occurrence, Franke said. At one point, convincing financial advisers to come work at PSECU took some arm twisting.
"It was a hard sell for some of the advisers," Franke said. "We would interview advisers but they couldn't grasp it. We've hired excellent advisers from the start but we're taking the position that it's better to wait and find the right person."