Educating Employees on Personal Finance May Move Investment Programs Forward
MADISON, Wis. -- Before introducing the latest online service or lending product to members, the education process starts with credit union employees. But it's with employees where a launch can linger aimlessly or, even worse, never get off the ground.
Once upon a time, most credit unions offered a simple share account and personal loans. Today, the average credit union has up to 10 different products, and there are more than 200,000 firms out there competing for the attention of credit unions, banks, brokerage firms and other financial players, said Joe Saari, president/CEO of Precision Information LLC, a publisher of interactive educational materials.
When it comes to investment services and financial planning, however, sometimes, employees are baffled by the jargon and thus, are reluctant to refer members to the credit union's investment programs. That can be costly, Saari said. Thirty years ago, most people had pension plans. The numbers have since dwindled to less than 13%, he pointed out. In their place is the growth of 401(k), 403(b) and defined contribution plans with 100 million Americans participating in one of these.
"The responsibility has shifted from employer to employee," Saari said. "The big challenge is how do you educate and empower [credit union] employees on the different features of products."
The traditional model of retirement--social security and Medicare, employer pension plans and personal savings--is broken, Saari said. According to a 2005 Federal Reserve report, negative savings rates have increased debt levels and critics say Social Security and Medicare may not be enough to sustain retirees. The average balance of pension plans is roughly $52,000, Saari said.
"The average American scores 55% or less on basic literacy scores," Saari said. "Is the average American your [credit union] employee?"
The $3 billion Desert Schools Federal Credit Union wanted to find out. It built a virtual university to train 1,000 employees on financial basics to help members build a better financial future and increase referrals, Saari said. In 2004, the credit union's program offered 18 online courses related to retirement, investing basics and other related areas. Between 2004 and 2006, more than 800 completed more than one course with another 230 earning their personal finance certificate upon graduating from the program.
Saari said the additional training resulted in 3,000 referrals, $20 million in sales and gross dealer concessions of $800,000 in 2004. The second year of Desert Schools' university produced 5,500 referrals, $40 million in sales and $1.6 million in GDCs. In 2006, referrals, sales and GDCs jumped to 9,500, $55 million and more than $3 million, respectively.
At the $2.3 billion Mountain America CU, a build your retirement internal education and marketing effort was created to promote savings, Saari said. Launched in December 2007, marketing activities helped boost excitement among employees. Branch display items and other materials rolled out this January and in February, a retirement readiness course was circulated to 400 employees.
As a result, 94% of those participating said they felt the program was valuable in helping to encourage savings, Saari said. Ninety-one percent said they were more likely to produce referrals. Individual retirement account deposits increased 92%, while term deposits grew 125% and referrals grew 28%.
Because of the program's success, Mountain America has moved forward with similar models including a taking the lead in your retirement campaign, which launched earlier this year. The credit union is in the early stages of a real estate and mortgage campaign with similar themes. Certificate degrees in personal finance, investing basics, retirement and wealth management are on the horizon.
"Credit union employees, like the average consumer, do not understand the basics of personal finance, investing or retirement planning," Saari said, adding there is no significant difference in education obtained or number of years worked in the industry. "An educated employee will do better in sales and referrals in the long term."