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SAN DIEGO – The mood around CUSO Financial Services, LP lately can best be described as bittersweet as the broker-dealer comes to grips with the news that one of its most successful clients is striking out on its own. On Jan. 26, the $1.7 billion Addison Avenue Federal Credit Union announced that its subsidiary, Addison Avenue Financial Partners, LLC (Financial Partners), signed a purchase agreement to buy Essex National Securities, Inc., an investment services broker-dealer from Essex Corporation Financial Partners. The deal, expected to close by Feb. 28, aims to allow the CU to continue to grow and leverage its position as a “leading provider of investment services to clients of financial institutions.” The acquisition means the CU will end its six-year relationship with CFS. The broker-dealer worked with Addison Avenue FCU to build its investment program to more than $10 million in revenue in 2005, said Valorie Seyfert, CFS president/CEO. “Addison Avenue Financial Partners has undeniably held the distinction of being one of our top performing and most successful programs,” Seyfert said. “While we’re sad to see them move on, we feel proud to have played an important role in their development and success.” The acquisition, which will become effective in the fall of 2006, will allow the CU to bring its investment and insurance program in-house, according to CFS. Steve Lumm, Addison Avenue FCU president/CEO said “the decision to move in this direction was purely a strategic one, made to continue building upon the success the program has already generated through its solid, six-year relationship with CFS.” “We have truly enjoyed our relationship with CFS over the past six years,” Lumm said. “This partnership has resulted in the building of one of the most successful financial institution-based investment service programs in the country. At this point in our evolution as a leader in the delivery of investment services, the acquisition of Essex National Securities, Inc. is a natural progression for Addison Avenue.” Seyfert said the best analogy she can offer about the move is a parent watching a child grow up and go off in the world – “you’re happy that they’re able to have that form of independence but still sad to see them leave.” Of CFS’ more than 100 CU clients, Addison Avenue FCU was among its biggest and most successful and one of 46 co-owners. Put in perspective, 20 of CFS’ clients did more than $1 million in revenue last year compared to the CU’s $10 million. One silver lining here is that Addison Avenue FCU has given CFS nine months to replace that revenue gap. Over that time period, account conversions will take place. “Any conversion is a disruption but we have an excellent working relationship to make it as smooth as possible. Anytime you lose a big client, quite frankly, it’s hard,” Seyfert said. “The good news is we have the same clearing house-Pershing.” Even though that commonality will make the transition easier, because CFS’ technology is linked to the CU’s home banking and point-of-sale ATMs, for instance, “it will take a lot of hard work from both parties.” The conversion has not yet started, Seyfert said. As for whether she foresees other credit unions following suit by buying or starting their own broker-dealer, Seyfert said she doesn’t expect this will be the start of a trend. “Addison is pretty unique,” she said. “The reality of this is the compliance burden has become very high and costly. For a credit union, unless you’re at a point like Addison, the economies of this kind of a move would not pencil out.” Seyfert said if one looks outside of CU land at other financial institutions in the marketplace, many of them are shutting down their broker-dealer divisions or outsourcing because of the high compliance and technology costs. “I would hope credit unions would be cautious in following Addison Avenue,” she advised. Still, she has no doubts that the CU will be successful and is hopeful that they can continue to have a relationship in another form down the road. “So many credit unions are empowered by Addison’s success and Addison has learned from many credit unions as well,” Seyfert said. “We grew up together. As they started seeing some success, they shared that success. It’s been a good, collaborative relationship.” -


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