In 2004, nine CUSOs were designated by NACUSO as Platinum Partners. Being some of the most innovative and progressive CUSOs in the industry, the six-month old group acts as a sounding board for the NACUSO Board of Directors and have pledged to support NACUSO's new vision. Credit Union Times asked...
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In 2004, nine CUSOs were designated by NACUSO as Platinum Partners. Being some of the most innovative and progressive CUSOs in the industry, the six-month old group acts as a sounding board for the NACUSO Board of Directors and have pledged to support NACUSO’s new vision. Credit Union Times asked representatives from each of the Platinum Partners what they consider to be CUSOs’ primary role in the credit union industry, and what they consider to be the greatest issue/challenge facing CUSOs. Executives from eight Platinum Partners shared their thoughts – XCU Capital Corp. declined to comment. They include: Valorie Seyfert, CEO, CUSO Financial Services, L.P., San Diego, Calif.; Richard Jungen, CEO, Central States Mortgage, Wauwatosa, Wis.; Merry Pateuk, director of public relations, PSCU Financial Services, St. Petersburg, Fla.; Scott Jentz, principle, Gateways Services Group, LLC, Greenwood Village, Colo.; Randy Karnes, CEO, CU*Answers, Kentwood, Mich.; Diane Johnson, CEO, Counter Intelligence Associates; Nate Truelson, director of sales, Corporate Network eCom, a subsidiary of U.S. Central, Lenexa. Kan.; and Kevin Lentz, senior vice president, Members Solution Group, CUNA Mutual Group, Madison, Wis. CUT: What do you consider to be CUSOs’ primary role in the credit union industry? Jentz: To provide the framework and support for credit unions to work cooperatively through the joint development and ownership of a CUSO. Jointly owned CUSOs provide credit unions the ability to share developmental cost and share improved pricing models. Johnson: CUSOs are every bit as important as they ever were, but different businesses need to be considered. CUs need to expand what they consider as valuable for CUSOs to offer. CUs consider CUSOs, products and services too narrowly, but CUSOs can offer a wide range of products and services both on the wholesale and retail basis. CUs are only as limited as their own imaginations. It’s a narrow thought process to think CUSOs can only offer contiguous financial services to a CU’s membership. I see CUSOs providing broader role in future than in past. Jungen: The CUSO movement has more value than it ever did in two ways. First, there are so many well run and diversified CUSOs in terms of products and services that those credit unions that haven’t formed their own CUSO could join a multiple-owned one and get the products they need. Second, many multiple-owned CUSOs have hundreds of credit union clients that bring credibility to the credit union management team or board of directors that would consider investing in an existing CUSO. Karnes: CUSOs’ role is to provide diversification, generate revenue, and focus investment for credit unions. Beyond this, we believe CUSOs also have a responsibility to demonstrate how cooperation can be a powerful force in serving members and ensuring the continuing relevance of the credit union model. Lentz: With the introduction of expanded powers, credit unions have substantial flexibility in how they organize their various operations and initiatives. CUSOs offer a mechanism that can be useful in execution of various strategies. A key is that the credit union first determine the strategy to achieve the organization’s objective and then determine what structure, such as a CUSO, can enable this. That is, following the maxim of “strategy before structure.” CUSOs can be useful in creating shared infrastructure initiatives with other partners offering an opportunity for shared governance. They can also be helpful in establishing relationships with nonmembers where that facilitates a credit union’s future objectives or is a necessity of a new enterprise. While in many cases credit unions are motivated to integrate cultures and processes of their various initiatives, there can be situations where a separation is important to a new venture’s success, particularly in early stages of development. CUSOs offer the ability to do this. Pateuk: The role of the CUSO is to be a conduit for the credit union industry to meet its growing field of membership opportunities. CUSOs can offer services efficiently and effectively to help our industry deal with the competitive and economic pressures that all credit unions encounter and as they continue to focus on growing business opportunities. Seyfert: I consider the CUSO’s primary role to be two fold – add value to the CU’s member relationship, and add non-interest income to the CU’s bottomline. Truelson: Innovators, Integrators, and Aggregators. CUSOs must be innovative in how they create and deliver value to their members. They must ensure their solutions can be integrated within the overall financial services offering of their members. And they must be an aggregator of volumes and common processes to produce efficiencies and economies of scale. Accomplishing each of these under a strong vision that is consistent with the credit union community is the role of CUSOs in the credit union movement today. CUT: What do you consider to be the greatest challenge/issue facing CUSOs? Jentz: To work together to improve the individual credit union services to their members. The competition is banks, not other credit unions. Johnson: What we see as the most important issue for CUSOs in the future is the business leadership of the CUSOs themselves. We’re better at this than we used to be – we used to just take people from credit union to manage the CUSO. Now we’re seeing the CUSO hiring more people from the for-profit side. We find it’s very difficult to take someone who’s worked in a not-for-profit credit union and putting them into for-profit CUSO because of the different mentality. It doesn’t work to have people from credit union work at a CUSO. It will be increasingly harder for CUs to make all of their money from interest income. CUs are fee adverse, therefore we can’t make up our income deficit with fees so we need other sources of interest income to bolster our revenue. This will be a challenge for the credit union CEO who’s the investor and who’s responsible for overseeing the activities of the subsidiaries. The CEO of a credit union is not the person who should be the CEO of the CUSO. The CU CEO should manage the strategic direction for the entire entity and provides oversight, but they should not be running the CUSO. Jungen: That depends on the CUSO’s industry product. With mortgage lending, the greatest challenge is on the state regulatory level. The mortgage banking product faces regulations that are different state to state and a multiple regulatory environment. Karnes: From the beginning, CUSOs have been the spark for a can-do attitude. We can expand what we offer members. We can build on the tradition of the credit union industry while evolving with our members. We can control our destiny by owning the creative process. We can be more. CUSOs can provide an operational advantage to credit unions that comes from the will to do more for less and to own collectively rather than buy from others. Lentz: CUSOs will need to focus on the effective execution of their mission – serving their credit union owners. This requires a very effective relationship management process (particularly in multi-owner CUSOs) or clear alignment within a single credit union management team. A result of this is a very clear strategic plan where the interests of all stakeholders and accountabilities of the CUSO are clear and supported by all parties. CUSOs will be dynamic and evolving in the future requiring an effective ongoing dialogue with owners, CUSO leaders must be responsive to their owners and effective in executing the planned strategies. Pateuk: The competitive landscape of financial services continues to evolve rapidly. The biggest challenge facing CUSOs is the need to rapidly adapt to changes in order to remain a valuable resource for credit unions as they navigate through growth opportunities. For some CUSOs, this may mean the ability to provide a broader range of offerings. Seyfert: They can not be run as a credit union division with the same infrastructure and bureaucracy of a CU. They must be run as entrepreneurial businesses with a business plan and model that is appropriate to their size and resources. Truelson: Unifying the needs and expectations of member/owners; effectively communicating their vision and value proposition to the marketplace; balancing service offerings that meet the needs of all members, but at the same time producing viable financial results. -
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