Old habits can be hard to break. But some are worth breaking-especially if they are costing your credit union money. One, in particular, needs some attention. I like to call it the "tradition of making less." There are many credit unions that continue to place investments with agencies despite the fact that the investment opportunities they provide pay less and generally ignore the individual needs of credit unions. And in this environment when margins are being squeezed hard, hanging onto expensive habits can hardly be afforded. Corporate credit unions can help credit unions break some of those old habits. Investment opportunities at corporate credit unions offer at least five big reasons for you to say bye-bye to agencies. But before getting into those reasons, I think it is important to understand the mindsets and missions of the financial intermediaries known as agencies-such as the Federal Home Loan Bank, Freddie Mac and Fannie Mae. They offer investment products-sometimes called agency securities (also know as "agencies"). Credit unions invest a lot of money-billions of dollars-into these agencies. The United States government wants to use that money to fuel the economy. In the real estate market, agencies such as Fannie Mae help raise capital to provide affordable mortgage loans. A quick glance at their Web page finds Fannie Mae's self-description: "Our public mission, and our defining goal, is to help more families achieve the American Dream of homeownership. "We do that by providing financial products and services that make it possible for low-, moderate-, and middle-income families to buy homes of their own. Since Fannie Mae began in 1968, we have helped more than 63 million families achieve the American Dream of homeownership." A noble mission to be sure, however, the mission is to fuel the housing market-not to help credit unions maximize the returns on their investment dollars. Agencies such as Fannie Mae have been providing investment opportunities for nearly 40 years. Corporate credit unions have been flexing their ability to help credit unions with investments for well over a decade. In recent years, corporates have become more sophisticated and have hired investment-savvy professionals. However, they have made these strides while adhering to the corporate credit union mission of serving member credit unions. In today's environment, "serving members" can easily be translated to providing more yield. But the corporate credit union effort goes beyond that. As a result, there are five big reasons that should cause credit unions to break with the tradition of dealing with agencies. Higher-yielding Close communication Customization Liquidity Diversification Each of these deserve a little explanation. * Higher Yielding: Putting corporate certificates side by side with comparable agencies and you can see, right away, one of the biggest differences-corporate certificates are generally 15-25 basis points higher. So always compare. And certain products-such as callables-give credit unions access to the yields of multimillion dollar jumbo investments when they bring $100,000 to $250,000 to the table. Simply put, there is no place-other than at corporate credit unions-where you can get that access. Corporate credit unions do that as a matter of routine-aggregating the investments of several credit unions to obtain a larger yield and then fairly distributing those higher yields back to participating members. * Close communications: Many corporate credit unions-including Southwest Corporate-have e-mailing and fax notification programs to let credit unions know within minutes after a structured certificate is created. These consistent-sometimes automatic-notification programs make certain that participating credit unions are aware of the high yield opportunist so that investment dollars can get to work as quickly as possible. * Customization: Agencies such as the Federal Home Loan Bank and Fannie Mae are designed to pull in investment dollars to meet their specific needs. As a result, their offers may be limited and may not necessarily fit credit union needs. Corporate credit unions create structures with credit unions in mind. They generally have numerous offerings. At Southwest Corporate, for instance, 100 special structured certificates were created for credit unions during 2005. Some were created specifically at the request of credit unions. (See the customization section below.) And credit unions have access to this flexible array of investment products commission free! A number of corporate credit unions have the ability to actively create a structure certificate investment that meets your specific needs. In others words, corporate credit unions can custom create investment opportunities. There is no one to call at Fannie Mae to even inquire about this level of investment service. * Liquidity: These days, corporate certificates of deposit enjoy no less liquidity than agencies. Corporates have adopted mark-to-market when it comes to redemption. Credit unions get paid market price, which can be higher or lower than the purchase price based on market conditions. The only difference will be that you talk to a corporate account officer instead of a street broker. The bid-ask spread might be even lower for a corporate CD than for agency securities. * Diversification: Generally speaking, the credit union industry has about 55 percent of its investable funds locked up into agencies, and only 18 percent in corporate credit union certificates. Investing with corporate credit unions will enable credit unions to diversify their investment portfolio into instruments with very similar risk profiles, while earning additional basis points. When you look at the entire investment capability of credit unions-you are talking about millions of dollars that go unearned! The bottomline is that agencies are more passive. An investing credit union takes what it can get at agencies. Their offerings are developed around the take-it-or-leave-it concept. I like to think that corporate credit unions are more aggressive-but aggressive on behalf of credit unions. I know that at Southwest Corporate, for instance, we have created more than three dozen special structures since the beginning of the year-each and every one yielding 15-25 basis points more than comparable agencies. Other corporates are enticing their members as well. With millions of dollars on the table, it might be a good time to break some old investment habits.