New Investment CUSO Formed by Fla. CU
With a diverse mix of college students, state government employees and natives who commute from neighboring smaller towns, Tallahassee, Fla., may be ripe for a new financial services alternative.
The $340 million Florida Commerce Credit Union made that discovery after doing extensive research of its market to assess from whom and where the greatest need stemmed.
Following five months of exploration, including several alpha and beta test runs in December, on Jan. 12 the Tallahassee-based credit union launched Six Pillars Financial LLC, a new CUSO that will offer services targeted at financial planning, retirement planning, wealth accumulation, preservation and distribution.
As the case with other similar CUSOs, Six Pillars will not require members to have a certain asset minimum threshold to participate, said John Medina, president of the new entity and investment services president at FCCU.
“Routinely and daily, we would get questions about financial planning and retirement services,” Medina said. “With more than 38,000 members, this fits overall with our mission.”
Indeed, Six Pillars, which was chosen from more than 100 names, takes its moniker in part from FCCU’s six core values of community, convenience, education, people, security and service.
Medina said the CUSO will be available to both members and non-members. In addition to the traditional investment offerings, Six Pillars advisers will also help those interested in setting up a budget and other financial goals. For some, the plan may be to start living within a budget, establish long-term savings and then transition to becoming an investor, Medina explained.
Several years ago, FCCU made an attempt to use a financial adviser who would serve other area credit unions but the effort fell through, Medina said. While he would not say how much it cost to set up Six Pillars, he did say generally the startup expenses depend on the number of advisers hired, the books of businesses brought over by advisers, whether books are purchased and the amount of time for velocity and to break even.
Incorporating investment services into the fold was a part of FCCU’s CEO Cecilia Homison and the board of directors’ strategic plan, according to Medina. With that missive out front, the first phase toward launch consisted of exploring the CUSO’s potential market share.
Medina discovered, of the 19 banks in the area 14 of them provided investment services. Drilling down further to get more information such as assets under management, client profiles and the number of advisers served by those clients proved to be a painstaking process, he recalled. It helped that Medina, who has nearly 23 years of commercial and private banking experience and had established a number of industry relationships in the area, could reach out to some of his contacts to collect more data.
Looking at national figures, Medina said he turned to the 2010 Kehrer-LIMRA Financial Institution Investment Program Benchmarking Study, which tracked under-performing elements of programs at both credit unions and banks. The study also helps financial institutions set targets for best practices performances. Medina said he was pleasantly surprised to see that credit unions outpaced banks in several areas including in certain referral and revenue categories.
“We wanted to know if the data would support adding yet one more investment service provider to the market,” Medina said. “The data overwhelmingly supported this.”
On state and national levels, Tallahassee residents have higher-than-average education and income, he learned. It also has a diverse makeup and is considered to be a pivotal research center due to the three schools in the city: Florida State University, Florida A&M University and Tallahassee Community College.
Medina said, based on the data he’s collected on the area, if Six Pillars obtains a 1% market share, the CUSO will grow and see returns.
The next phase was putting together a business plan that would outline how Six Pillars would enter the market, establish broker-dealer relationships, educate staff and members, and build a new brand, among other factors. After the board approved the plan, the selection of a broker-dealer, recruiting and hiring financial advisers, creating an LLC and reviewing legal and accounting and marketing mandates took another three months.
An exhaustive search of broker-dealers was necessary because it was important to partner with one that was not an investment bank that focused on proprietary products to avoid an environment where clients would feel influenced or pressured, Medina said. Ultimately, Six Pillars signed on with LPL Financial, one of the country’s largest independent broker-dealers serving more than 12,500 financial advisers including those working with credit unions. Medina said Six Pillars also hired a financial planner and CPA with extensive experience as a trust officer.
While it’s only been a few weeks since the CUSO made its debut, Medina said FCCU staff, referred to as team members, have already started sending over referrals.
Rather than a rapid-fire marketing blitz, Medina said the plan is to take a methodical approach to growing the CUSO’s business. The first step is education: training team members as well as signing them on as clients since many have 401(k) plans and may have questions about things like wills and estate planning.
Billboards and direct mail will follow at the appropriate time to get the word out about Six Pillars, Medina said. Seminars are expected to be a critical tool, he pointed out. The key is the sessions will be timed to pivotal times during the year including tax season and the start of college.
Medina– who has strong ties to the Tallahassee area, having graduated from FSU and being a native of nearby Live Oak, Fla.–sees the potential for Six Pillars.
“We found competitors in our community who said if you don’t have a minimum of $250,000 in assets, you couldn’t see a CPA or adviser,” he said. “We found a number of competitors who, when you literally sit down to speak with them, you could have a broken foot or a cold and you were going to get a whole policy or an annuity. We don’t want to be limited to product offerings.”