COLUMBIA, S. C. – The Internet has made inexpensive investing available to anyone with a computer and modem, and numerous competitors, new and old, are now vying for the business of increasingly Web-savvy credit union members. Retaining those members, their loyalty, and their assets may be increasingly challenging in such a fragmented market, industry observers say. “Online brokerage customers must now be envisioned as online financial services customers who access multiple providers and products from their browser,” says Shaw Lively, research manager for e-investing at IDC in Framingham, Mass. ( Lively says his firm’s recent research shows that 67% of online brokerage customers access at least one other financial service online. He also says that 35% of all brokerage customers do online banking, “which is pretty significant.” The market, in fact, has matured to where simply offering online brokerage services may not be enough to protect the member-CU relationship, Lively says. “This is not a new space,” he says. “That moment has long passed.” Instead, integration may be where it’s at, Lively says. “That’s one thing that adds power to this,” he says. Banking, brokerage, credit card funds, balances and services should all be accessible together, and on one page, if possible, he says. “Make sure it looks and feels like it’s all from my credit union as much as you can. “Our research says the more integrated the offer, the more attractive it will be.” A natural opportunity Similar findings emerged in the latest survey consortium conducted by Callahan & Associates (, which garnered responses from 15,000 members from 14 credit unions in an Internet polling conducted in June on the topic of “Online Members’ Use of Other Financial Service Providers.” Thirty-two percent of the respondents who said they used another online FSP account used it for online brokerage services, says Scott Patterson, Callahan’s e-commerce manager. He says the survey also indicated a natural opportunity for credit unions. “In general, the reasons a member indicated leaving an online stock brokerage service were for the same reason you might see listed for traditional, non-Internet services: fees too high and/or poor service,” Patterson says. Indeed, players in this space point to the unique relationship between member and credit union as something to preserve and build on, and that while online brokerage services are ubiquitous, presenting it in the credit union context is important. “The relationship that credit unions have with their members is one of the most trusted relationships in business today,” says Peter Barnard, vice president of strategic alliances at VIFI (, the Indianapolis-based financial technology services vendor. Offering the complete range of financial services, and keeping it under the umbrella of the credit union, is vital, Barnard says. Choosing the right vendor for third-party services is one key. Another is branding. When the member goes into a branch to talk to an investment services representative, branding probably isn’t a problem. But when that same member is conducting business online and competitors can lurk at every click of the mouse, it could be. Of portfolios and strategy That’s where VIFI is positioning its new Internet brokerage product. Called InternetBroker, it offers stock, bond and fund trading, portfolio tracking and research services on an open platform that provides complete branding for the client credit union. “Imagine this scenario,” Barnard says: “A credit union member is interested in utilizing brokerage services. If the credit union does not offer these services, the member may seek out the services of one of the big-name online brokerage houses. To trade with this broker, the member will open an account with that brokerage and transfer assets from the credit union to the big-name brokerage house for trading purposes,” he says. Offering complete services under the credit union umbrella minimizes the risk of losing members and their assets. It comes down to share of wallet, protecting that and offering the members what they need to stay in the secure environment of the credit union for their financial services. That’s what City and County Credit Union, a 35,000-member Minnesota institution whose field of membership centers on public employees in St. Paul County, had in mind when it signed on as the beta client for VIFI’s InternetBroker. “The product melds nicely into our other e-commerce initiatives,” says Marc Kilgore, vice president of information systems at $250 million CCCU ( “Our long-term strategy is to develop a full-financial service portal for members, focused on things appropriate for our credit union. “We have no desire to deliver sports and weather to our members on our Web site. . We deal with money, and that is our focus. When our members think of anything to do with money, we want them to think of our credit union,” says Kilgore. While it’s not a “magic bullet to bring in piles of additional revenue,” Kilgore says, “a fully branded brokerage service was important to retain the members with higher balances.” He adds, “We believe that if becoming the primary financial portal for members is a goal, brokerage services are absolutely necessary. We believe it is very important to prevent members from leaving our credit union just because we do not offer a service that can be delivered so inexpensively.” Lowering the barriers Allowing small investors to get involved also is a way to compete with the big discount brokers while providing credit union-type service. For instance, – which allows investors to build their own stock portfolios with no minimum investment and relatively paltry fees – has signed on more than eight million members in its co-branding relationships with about 70 credit unions, including some of the nation’s larger institutions. “With no account or investment minimum, ShareBuilder ( allows a lot of people without a lot of resources into the market,” says Kathy Schanno, director of partner marketing for ShareBuilder’s parent company, Netstock Corp. in Bellevue, Wash. “It also instills great savings and investment habits. ShareBuilder is kind of an atypical service in the online brokerage market, and it fits well with credit unions, which are always looking for services that have a higher purpose,” Schanno says. Security Service Federal Credit Union ( of San Antonio, Texas, a $2.2 billion organization with 437,000 members, has incorporated ShareBuilder into its stable of other co-branded financial services. “We’re here to help the credit union member however he presents himself to us,” says Keith Sultemeier, manager of SSFCU’s financial services CUSO, Security Service Investment Group. “Most brokers want only wealthy clients. That’s not our model. We’re also going to do a large volume of small transactions. If someone presents himself as a lower-income member just getting started in investing, we’re going to sit down and work with him. “We’re not going to send him to E-Trade.” Technically, not challenging About 90% of ShareBuilder’s transactions are processed through automated clearinghouses via ShareBuilder Securities Corp., its self-owned broker dealer, and it operates as an application service provider, so onsite IT resource commitments for partner CU’s can be kept to a minimum, Schanno says. The technical challenges also were “minimal,” CCCU’s Kilgore says of the implementation of VIFI’s online brokerage ASP. “We assisted in testing the product and provided input throughout its development. The resources required were minimal, other than dedicated time to test the product on an ongoing basis. No new hardware or software was required.” His experience may be fairly typical, according to the organization that provides online brokerage services to about 900 credit unions and serves about 600 with face-to-face investment services representatives. “Just being able to provide the service is not too technically difficult,” says Kevin Lentz, a vice president for MEMBERS Financial Services at CUNA Mutual Group. ( “Virtually anyone can provide that link to a third-party brokerage service. “Where we need to put more thinking and resources behind this is how credit unions can understand and benefit from the additional relationships. “Are they getting information from what the brokers have done? Are they able to understand what information they can get from CRM and other customer processes, and use that?” Integration of that kind of technology, plus the ability to sweep funds between brokerage and traditional share and draft accounts, is something MEMBERS works to offer its client credit unions, Lentz says. Marketing and the perfect partner Kilgore at CCCU says his organization’s goal is that the service pay for itself within three years, and that they are encouraged by the acceptance they have already for it before marketing even has gotten under way. Marketing, indeed, may be a key point, research indicates. Patterson, the Callahan e-commerce manager, notes that in the latest survey consortium there, credit union members often listed “adding an online brokerage service” as something they would be interested in, when in fact, in some cases it already was offered to them through a CUSO link on their site. “This possibly indicates that these programs aren’t being promoted effectively on the credit union’s site and in traditional marketing,” Patterson observes. With the stock market now in the doldrums, brokerage services may not be a hot ticket compared with other pressing concerns for credit union strategists, but “regardless of size, a credit union can’t just walk away from this question, and the reality is that nine times out of 10, they’re going to have to outsource it,” says Keith Nolan, president of NAFCU Financial Services ( The value-added services arm of the national trade group has created an advisory committee to study offering online brokerage services itself, Nolan says, and he has this advice for his own organization and others: “I think the challenge is finding the right partner that can be trusted to not cross-sell products and services, and can understand the difference between a customer and a member.” – [email protected]

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