Maintaining Scale, Competitive Pricing Key for CU Linked Broker-Dealers
CU Times Senior Staff Reporter
NAPA, Calif. -- Addison Avenue Financial Partners was considered among the trailblazers within the credit union industry after it acquired Essex National Securities Inc., an investment services broker-dealer, in March 2006.
A subsidiary of $2 billion Addison Avenue Federal Credit Union, AAFP bought Essex from New York-based Essex Corp. Financial Partners. Essex now manages $5.1 billion in assets for serves 28 credit unions and banks. Nearly 50,000 member accounts were converted following the acquisition.
With nearly 24 years of experience in the investment services marketplace, Scott Davis, president/CEO of ENSI, has seen the evolution of the credit union presence here. One of the key brokers of the acquisition, Davis began his career in 1984 at a regional investment firm. At ENSI, he oversees the overall operation of the broker-dealer including new product development, vendor relationships and maintaining close contact with the company's management teams. He also chairs ENSI's executive committee and serves on the board of directors.
Credit Union Times recently asked the industry veteran to share his insights on a number of timely investment and broker-dealer issues, specifically, what it takes for credit unions to compete.
Credit Union Times: What is the biggest challenge for independent broker-dealers that serve the credit union industry?
Scott Davis: In our view the biggest challenge is to ensure that we deliver tools that allow credit unions to move toward branding and controlling their investment services program so that the member experience is consistent with the credit union's vision and mission. Too often in the independent broker dealer space we see the broker-dealer driving program structure, brand, process and product selection when, truly, the credit union should be driving these items to provide the desired member experience.
CU Times: As the head of a broker-dealer that has more visibility within the credit union space, what would you say sets the relationship apart from what competitors offer?
Davis: We focus on understanding the mission and vision of our partner credit unions and leverage our experience in branding, marketing, training, and program structure to help implement investment programs that deliver consistent member experience and reflect the unique brand image of the credit union. We use the flexibility and open architecture approach of our technology platform to help support the credit union's vision for their investment services program. Our interest is providing unique solutions that meet member needs. At ENSI, we believe very strongly in putting the member-client experience first. This approach allows us to focus on organic growth within our existing client base.
CU Times: There's so much happening that has affected the nation's economy--foreclosures, soaring gas prices and so forth--credit unions, for the most part continue to be more resilient than their financial counterparts--from where you sit, how has the troubled economy affected business at Essex?
Davis: There is no question that the current macro-economic environment affects everyone in the financial services sector. From our vantage point, we see a wide range of impact on financial institutions of various sizes and structure. Staying true to the credit union philosophy of focusing on the member-client has served us well. As one might expect, we see a shift toward more conservative products, such as fixed annuities, and clients continue to shorten maturities within their fixed income portfolios. In addition, market conditions like these offer ENSI the opportunity to emphasize the training expertise for which Essex has always been known. In difficult market conditions, customers need a relationship that will reassure them about the reasons they originally chose to invest through their credit union. ENSI has extensive training for financial advisers that helps them be more proactive with their members-clients as the market dictates.
CU Times: Some in the credit union industry have said that it may be hard for some broker-dealers to compete with the big boys--what are your thoughts?
Davis: From a pricing standpoint, a broker-dealer serving financial institutions and credit unions will need the scale to drive the benefit of competitive pricing to the member. Thus, to compete with the big boys, we need to have a plan that will ensure we maintain that scale. We will have to demonstrate that plan and communicate it to our credit union partners so they can understand the relative economics. The second part of competing with the big boys, we believe, is our ability to deliver customized, value-added services that support the credit unions' business plan. The relative economics, in conjunction with the added value from a more flexible, customizable platform, will continue to make smaller broker dealers relevant for those who seek more input and control over the solution they choose.
CU Times: Credit unions continue to find ways to remain relevant to their members. How can a credit union's investment program serve as a means to keep their members from straying?
Davis: I think that credit unions should focus on branding their investment services programs in the image of the credit union and use the investment services program as an extension of the overall member experience that has made the credit union relevant to their membership.