Nearly two years after what was considered to be the first homegrown broker-dealer for credit unions closed shop, several of its former executives have risen from its ashes.
XCU Capital Corp. was bought by independent broker-dealer giant LPL Financial Corp. in August 2007. Most of the 24 credit unions serviced by the CUSO stayed on after the acquisition. Still, some say a huge void surfaced after the demise of the San Diego, Calif.-based broker-dealer and investment advisory firm, which was founded in 1987 by then Xerox Federal Credit Union, now the $798 million Xceed Financial Credit Union.
Today, there are only a handful of CUSOs that offer broker-dealer services exclusively to credit unions. Two former XCU Capital executives are hoping to change that. In May, Marco Fuentes, who served as assistant vice president of compliance and operations at the broker-dealer, and Eileen Griffin, the firm's former vice president of marketing and human resources, launched Veriture Financial (www.veriturefinancial.com), a firm offering investment and insurance services tailored for credit unions.
"I was with XCU Capital for seven years. Some would say I was their biggest cheerleader," Griffin said. "A lot of credit unions came aboard back then. Some very large, some smaller, some corporates and community credit unions. I was disappointed [when XCU Capital closed], but I think the decision was made for a good reason."
Fuentes will serve as Veriture's CEO, and Griffin is the new company's executive vice president of marketing and communications. Both acknowledged the CUSO is not trying to be the big fish in a small pond of broker-dealers. The Del Mar, Calif.-based firm has partnered with White Pacific Securities Inc. in San Francisco for brokerage services and a self-directed online trading platform. It also has an alliance with Kafl Insurance Resources in Rochester, N.Y. Because their product lineup, which includes access to stocks, mutual funds and annuities, is probably no different from what others offer, Griffin said the firm is looking toward service approach as the differentiator. It's critical since credit unions build their foundations on member service, she offered.
"Any member can pick up the phone and call the CEO to tell them how they feel. And, that's how it should be," Griffin said. "We want to be a partner. We're not going to be the biggest. That's not our goal."
To that end, Veriture is aiming to aggressively tap the small credit union niche. Fuentes said some of them may field member requests to offer brokerage and investment services but can't afford to do so because of a lack of financial resources and manpower. The firm is hoping its online trading platform will appeal to smaller credit unions for its ease and low cost. One added feature is the ability to tailor options to a specific ethnic or religious group. The platform can be offered in English, Mandarin and Taiwanese, Fuentes said. Veriture is currently working on adding Spanish, Russian, Korean and Vietnamese by year end.
"Some of the small credit unions couldn't see the merit of have someone sitting in the branch," Fuentes said. "It's getting very competitive even as banks are going away. So, it's important to have the ability to service anyone."
While Veriture will court small credit unions, the firm is also looking to build relationships with midsize and larger credit unions that can support a brokerage program, Griffin said. Given the size of some member's savings, it was important to secure a technology partnership with a firm that would drop its minimum opening requirements, she added. In Veriture's case, it's a minimum of $500. Monthly online trades are under $11. To sign on to the company's services, credit unions don't pay any upfront fees, Griffin said. However, there are expenses for customization.
"The point is credit unions can offer a low-cost solution to members," Griffin said.
To keep Veriture's overhead low, the CUSO has contracted with several former XCU Capital employees for marketing and technical support rather than hiring full-time staff, Fuentes said. The firm is currently in contract talks with several credit unions, Griffin said.
Running efficiently is the name of the game in this uncertain economy, both executives agreed. Even as the Dow Jones industrial average remained above the 10,000 mark for several days last week, most investors are still skittish about where to turn. Fuentes said this is the ideal time for brokers.
"The timing is just perfect. You might have a broker but you can't get a hold of them because your portfolio is down. A lot of people trust their credit unions. To be able to have access to investment services there, it's a very nice place to be in."
Griffin concurred as she recalled the similar vibe felt right after the 9/11 terrorist attacks.
"Just as it is now, there was a lot of hand-holding then. Brokers understand that. The good ones will take the time out to calm nerves. They might not have all the answers, but at least members have someone who will listen."
Griffin and Fuentes are not the only ones to resurface from after XCU Capital's acquisition. Former XCU Capital President/CEO Mark Hoaglin launched Above the Crowd Business Development Group, a management consulting firm earlier this year. After LPL Financial acquired the credit union-owned broker-dealer, Hoaglin was hired as senior vice president of credit unions at LPL Financial Institution Services where he worked for more than a year.
They both learned the importance of having good brokers while at XCU Capital. While the idea of having an online trading platform developed roots there, it never blossomed, Griffin said. Fuentes, who had been at the CUSO for two years, got his first exposure to the credit union model and has never looked back.
"I was sold on the concept and how members were treated. It was sad to see XCU Capital go, and I hope it went the way people wanted it go. But it solidified the fact I wanted to continue working with credit unions."
–msamaad@cutimes.com

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From XCU Capital's Ashes, Executives Emerge to Carry On Brokerage Services

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