Five years ago, Gesa Credit Union acknowledged that having an investment program was not a top priority.
Then the Great Recession crept in around 2008, forcing the $1.2 billion cooperative in Richland, Wash., along with many in the industry, to rethink of ways to capture wallet share on everything from business loans to financial planning.
In 2009, Gesa launched an investment services program that will mark its five-year anniversary this year. Serving a gamut of members from all walks of life, the credit union’s wealth management division has $44 million in assets under management, according to Eileen Griffin, senior vice president of human resources and wealth management.
“It has had ups and downs. The market has certainly been uncertain. At this point, we are positioned very favorably,” Griffin said.
Members have access to a full range of products from mutual funds and annuities, to managed accounts and insurance as well as financial and retirement planning, Griffin said. The managed accounts have become very popular with the volatility in the stock market, she added.
“We have a strong commitment to service so we will open even very small accounts,” Griffin explained. “We take the time to meet with potential investors, learning about their risk tolerance as well as their goals and plans, before making investment decisions. Our goal is to have long term relationships with our members through the investment program; not just to increase the assets under management.”
To get Gesa’s program off the ground, the credit union hired an individual with previous broker/dealer experience to oversee the division, Griffin said. In 2011, Griffin joined Gesa after serving as vice president of marketing and human resources for XCU Capital Corp., the credit union owned-broker/dealer that was acquired by LPL Financial. Griffin said upon coming to Gesa, she immediately began expanding the program. That included increasing staff from two financial consultants to four and deliberately looking for the type of person who would fit into a credit union program.
“I was committed to hiring people who I knew would be willing to work with smaller accounts, as well as the larger ones and people who could integrate effectively with the credit union culture,” Griffin recalled.
Gesa’s investment program was to cover the credit union’s outer branches more effectively and to offer more access to the services of a financial consultant throughout the Tri-cities, Griffin said.
If was critical to have an environment where when a member comes to Gesa for investment advice, they should be treated with the same high service standards they have come to expect from other areas of the credit union, Griffin explained. Hiring two more financial consultants was in line with Gesa’s overall growth. The cooperative added two branches in 2013 and its expansion plans include two additional new branches in 2014.
Additionally, technology and tools have given the financial consultants an edge over others in the market, Griffin said.
“When we sit down to meet with a potential client, they can be presented with an analysis that makes them feel confident about the investment decisions and future planning,” she noted.
Still, as the investment program grew, a few growing pains surfaced.
“There are always challenges. Paperwork presents a huge challenge,” Griffin said. “We have an experienced registered sales assistant that takes on the paperwork battle every day. He saves the financial consultants from the time and frustration that is required to do business in this industry.”
Just as the program was really ready to grow, Gesa went through a core conversion, which took a great deal of time and attention, Griffin said. Now that the project is completed, the core upgrade is a faint memory and the investment program is better positioned to move forward. Rather than focus on growing noninterest income, Gesa prefers to provide a much needed service that its members had been requesting of the credit union, she pointed out, adding, this will become a focus in its planning moving forward.
Gesa’s investment program launched a year after the Great Recession emerged to cripple the country’s economy in everything from job losses to a crash in the housing market. The credit union’s members, like many others nationwide, felt the sting.
“There have certainly been repercussions. People are staying in CDs in spite of the very low rate simply because they feel it’s safe,” Griffin said. “Our financial consultants, however, have had great success working with these members because they are able to do so face-to-face inside the comfort of the credit union environment. Our members really appreciate that.”
At the time of Gesa’s investment program launch, the Richland, Wash., area had more doctorate degrees per capita than any other place in the country. The credit union’s roots grew from General Electric employees who formed the cooperative in 1953 after local lenders weren’t willing to make consumer loans. Gesa transitioned to a community charter in 1996 and has a membership that includes a high percentage of scientists, engineers, doctors and other medical specialists. Still, the type of member using investment services at Gesa runs the gamut, Griffin said.
“There is a wide range of people with accounts. We are actually opening a surprising number of starter accounts for people in their 20s and 30s,” she noted.
The goal for 2014 is increasing revenue for the investment program, Griffin said. It’s a battle shared by others in the industry. While credit union-affiliated households hold one-half of all personal financial assets in the U.S., and credit unions have a reputation for being a trusted financial services provider, growing in the investment services space continues to be a struggle.
Market share has actually dropped, as the total number of credit unions offering investment services continued to shrink in 2012, according to the 2012-2013 Credit Union Investment Services Benchmarking Study, conducted by management consultant firm Kehrer Saltzman & Associates in Charlotte, N.C. From 2008 to 2012, the number of credit unions selling investments and insurance declined by 12%, which mirrors the 12.7% decrease in the total number of credit unions nationwide.
Household revenue penetration was another metric KSA studied. The firm said it is a more meaningful penetration measurement because it looks at the member’s economic unit and shows how much investment services are being used. Credit unions averaged $20.66 in annual investment services revenue per member household; the top quartile averaged $23.30.
Meanwhile, Gesa may have all the pieces in place to be the exception to stalled market share.
“We have outstanding personnel in the financial consultant roles and they are now comfortable with the LPL system, the Gesa program and are working very effectively with the branch staff,” Griffin said. “We are fortunate to have the support of the branches and our marketing team. We are running on all cylinders and looking forward to all upside in 2014 and beyond.”