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MADISON, Wis. – CUNA Mutual Group is giving new meaning to the term “wearing two hats,” and in the process may dramatically change the way credit unions meet their members’ financial needs. CUNA Mutual has launched a new program that allows existing CU employees to offer members a select group of mutual funds and annuities. The intriguing characteristic of the new program is that it calls for CUNA Mutual and credit unions to share employees. Here’s how it works. A CU employee – whether a branch manager, loan officer, member service rep, etc., – is trained by CUNA Mutual’s CUNA Brokerage Services Inc. subsidiary to sell select mutual fund and annuity products. The employees must pass a test to receive a NASD Series 6 license and a Series 63 if necessary in that particular state. These employees, which CUNA Mutual refers to as registered member service representatives, can then sell members certain mutual funds and annuities. When an employee does so, they must clearly disclose to the member that they are acting on behalf of CUNA Brokerage Services, Inc., not the credit union. There must be proper signage and materials letting the member know it is now dealing with an authorized rep of CBSI. What’s revolutionary about this program in CUNA Mutual’s eyes, is that a credit union can meet members’ growing demand for non-depository products such as mutual funds without having to hire new employees, and bear the full cost of those employees. The credit union also does not need an investment CUSO. This program is distinct from CUNA Mutual’s MEMBERS Financial Services program in that under that program MFS reps also operate out of a CU’s branches, but they are compensated entirely by CUNA Mutual, not the credit union. “The biggest difference is these are shared employees. These are employees of the credit union acting on behalf of CUNA Brokerage Services Inc. Any time they have a discussion or answer member questions about these investments, they are acting on behalf of CUNA Brokerage,” said Joe Salomone, manager of RMS Development for CUNA Mutual. The credit union earns fee income from CBSI based on the number of products sold. The credit union can then decide how to compensate the employee who is wearing two hats. That compensation decision is left entirely up to the CU, according to Salomone. A CU could decide not to give any extra compensation; work it into an incentive plan; factor it into the employee’s salary, etc. Salomone said another advantage of this program is it builds on the sense of familiarity certain employees may have with members. “It could be a member service representative that has built strong relationships with members. They lend themselves to having those investment conversations because of the familiarity,” said Salomone. As with any security sales, disclosures abound, said Salomone. “We have to make sure we’re in compliance with NCUA Letter 150, making sure we’re situated within the branch and disclosures are verbally and visually presented. They have to verbally express that they are not selling on behalf of the credit union, but on behalf of CUNA Brokerage Services Inc, and that it is not a credit union product. It is not federally-insured, not guaranteed; it does involve risk,” said Salomone. Any advertising a credit union wants to do for the products must be approved by CBSI. Salomone said advertising guidelines are much more stringent, and should really focus on getting across that these reps are available for these specific products. “It should be very non-descript,” he said. Salomone noted that the area where the employee is selling the products should be as far away from the teller or deposit-taking area as possible and should be as distinct as possible from the rest of the branch by having the appropriate CBSI signage. Navy FCU’s subsidiary, Navy Federal Financial Group, piloted the program with CUNA Mutual. At press time, five Navy FCU branches were offering it. Navy is looking at it as a way to expand its product offerings in branch locations where membership volume doesn’t justify a full-fledged NFFG rep or an MFS rep. Wayne Williamson, branch manager for Navy’s New Orleans branch is an authorized RMSR and has been selling the products since July. “As part of my due diligence before recommending any investment to a member, I get their basic financial and family information. I spend a half hour just getting to know them and seeing where they want to go,” said Williamson. “And I make recommendations on mutual funds or CDs. My initial recommendations are not in the form of specific mutual funds, just if the member should get into a fund.” Once that’s determined the RMSR can present CBSI’s mutual fund options. Right now the program offers select funds from CUNA Mutual’s MEMBERS Capital Advisers investment affiliate, and funds from three other fund companies, as well as two fixed annuity products. The RMSRs have remote advisers to assist them if they have questions about a member’s particular financial situation and investment path. For those credit unions that have MFS reps on premisses, the RMSR would talk to the MFS rep for guidance, and the member in some cases may be passed on to the MFS rep. Williamson said he typically sits down with six to eight members a week, and he prefers to do it by appointment. He has to juggle his responsibilities as branch manager to get face time with members. “I’ll make time to see any member in person,” said Williamson, meaning if a member visiting the branch wants information then and there without an appointment Williamson will try to accommodate. Tom Yee, vice president of investment services for NFFG, said as of the end of August the five Navy RMSRs have sold about $200,000 in mutual funds, and another $200,000 was referred back to NFFG or Navy FCU. “It allows us a tremendous cross-servicing opportunity,” said Yee. Salomone said this program is ideal for small to mid-sized CUs that may not have the volume to justify a MFS rep, but want to give their members expanded investment options. The program takes about 20 weeks to get up and running. This includes training the CU employees which requires them to attend “blitz schools” designed to prepare them for the Series 6 and Series 63 examinations. Once employees are licensed, they then attend a three-day investment skills class. After two months as an RMSR, the employees can attend follow-up classes reinforcing what they’ve learned. Salomone said this program will also help CUNA Mutual offer investment products through more CUs, without having to have MFS reps on-site. Right now CUNA Mutual has 440 MEMBERS Financial Services Reps throughout the country. He said CUs that start with the RMSR program, may find demand is sufficient to warrant an MFS rep. [email protected]

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