WASHINGTON and ROCKLIN, Calif. — After a little over a year of gathering data from more than 1,300 credit unions and 60 broker-dealers on the scope of their investment programs, reaching more members has become an attainable reality.
Callahan & Associates and Snyder Consulting Solutions have collaborated to form the 2007 Credit Union Retail Investment Services Benchmark study, which includes several dozen financial metrics including investment account/member penetration ratio, financial consultant compensation, and benefits expense ratios and net income contribution.
Data from 1,304 credit unions includes 946 of them that use in-person models with members and 358 that use call centers. The data was collected from 2005 through the third quarter of 2007. The official release of the study is set for February.
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"We wanted to put a stake in the ground as far as looking at the global view core credit union retail investments," said Pete Snyder, president/CEO of Snyder Consulting Solutions, an investment and insurance service integration firm. "Credit unions are scaled and structured differently than banks. We in credit union land are open to sharing and collaboration and the timing was right."
The value of the assets for those surveyed totaled $45.5 billion with 1.3 million investment accounts and 2,007 financial consultants. Some of the key trends showed that assets under management grew 14.5% and accounts grew by 8.1%.
To keep the growth momentum going, the study found that expanding the financial consultant sales force as well as adding "associate" financial consultants to an investment team, effective service and support staffing models and administrative support could help credit unions expand even further. "The associated financial consultant addition to the service and support model enables existing financial consultants to continue to serve existing clients while at the same time to pick up new business," Snyder explained. "The retail investment business is very relationship-focused and very labor intensive given the volatility of the market and how we can get emotional towards our money."
Credit unions tend to be more involved in a need-based sales approach versus a product and service approach, Snyder pointed out. The entry into fee-based transactions is also on the rise. From year-end 2006 through June 2007, fee-based revenues for CUs increased 51%. Programs that were formed by broker-dealers grew by 37%.
"As credit unions are growing their revenues faster, it's because of the learning curve," Snyder said. "In any kind of business channel, the learning curve is characterized by some of the best practices that some credit unions have done over the yeas and identifying the top performers. They've been able to penetrate membership by expanding their sales force."
Indeed, the investment channel is becoming increasingly important to credit unions as they look for ways to reach new markets, said Jay Johnson, executive vice president of Callahan.
"If you look at the changes that a lot of credit unions have undertaken to broaden membership, broaden services and products, and become full-service providers, (investment services) is a key component," Johnson said. "Particularly, when you look at the aging member, it will more of an issue as well as baby boomers getting closer to retirement and also focusing on younger people."
The benchmark study will be published on an annual basis. The 2008 study will include an expanded section on the fee-based area and is scheduled to be published in the summer of 2008, Snyder said.
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