With 67% of its 42,000-member base maintaining a checking account at Alabama Credit Union, the cooperative is on a mission to be a one-stop shop.
"I hate to send members to other financial institutions," said Steve Swofford, president/CEO of the $360 million CU in Tuscaloosa, Ala. "It doesn't make sense to send [them] to banks where they could end up moving other assets there as well."
While it's been a few years in the making, Alabama CU is finally ready to offer trust services to its members. Starting July 1, they will have access to trust and asset management services through an alliance with the CU-owned MEMBERS Trust Co. in Tampa, Fla. Referrals will come through a MEMBERS Financial Services representative at the CU serving as liaison to the trust company. A local network of attorneys stands ready to help with any legal documentation.
Although the CU can handle certain types of trust accounts, from time to time Alabama CU members would request other related services. Over the past five years, the idea to expand was bounced around but Swofford said the financial institution just didn't have the size to offer a standalone division. It was important to partner with an entity with credit union ties. It helped that Swofford has known Tom Walker, the president/CEO of MEMBERS Trust and an Alabama native, for more than 30 years. After discussions at this year's CUNA Governmental Affairs Conference, the CU decided to make its move.
"In these uncertain times, to make a commitment for salaries and benefits with no guarantees to recover those costs, it didn't make sense to us" to go it alone, Swofford said. "This [partnership] gives us a chance to test the waters."
MEMBERS Trust continues to buck the trend of some trust companies that require between $500,000 and $1 million to utilize services, said Sheldon Reynolds, vice president of trusts and investments. In Alabama CU's case, the account minimum for the nationally-chartered trust firm is $100,000. Beyond that, many members may have life situations ideal for asset management. Families with special needs children often need trusts as do elderly members who are planning for the potential incapacity, Reynolds offered. Blended families with children from a previous marriage and families with persons who are addicted to drugs or are spendthrifts are also prime reasons for ensuring trusts are in place.
"It's more about family dynamics than estate taxes," Reynolds said. "I think the image that you have to be ultra wealthy [to open a trust account] is perpetuated by big trust companies," Reynolds said.
Alabama CU is the second alliance MEMBERS Trust has secured this year. The trust company now serves nearly 50 CUs. Reynolds said as more in the industry continue to move beyond the nation's financial crisis, many of them will shift their focus back to long-term projects that bring value to members.
Meanwhile, Swofford said the CU's MEMBERS Financial services rep will undergo training between now and the July 1 rollout date. Some compliance issues will be ironed out and a marketing campaign is underway. The new offering will complement Alabama CU's investment program, which has been in place for roughly eight years.
"We're not expecting a flood of people. We've set some targets. They're fairly low in the first year but as word spreads, we're looking to increase those goals," Swofford said.