Rather than having to pull rabbits out of his hat in 2009, Scott Boyd took a conservative yet diverse approach to buffer his mostly older clients against an unstable economy.

Boyd is an investment adviser with $1.6 billion Kern Schools Federal Credit Union in Bakersfield, Calif. Of the 1,000 members he works with, their average age is 65 to 75 and a big percentage of them have $1 million or more in assets. He spent the past year convincing many of his clients to spread out and diversify and keep some links to the stock market even though some wanted to jump ship.

“They're afraid of the economy, they're afraid of losing their money, and they became leery of bank deposits and the FDIC,” said Boyd, who has been in the investment industry for more than 30 years. “They certainly wanted something with a guarantee or low risk.”

That may be the tune nationwide as financial advisers sit down with their members, some who may have had to postpone much-anticipated retirements or scale back on 401(k) contributions as layoffs, prolonged unemployment and home foreclosures eroded shored-up savings. The name of the game seems to be “go conservative.”

Boyd had a few clients who planned to retire within the next couple of years. Many of them are teachers who had variable annuities. Several of them of had to curtail their retirement plans because their pension values took a nosedive.

“People wanted to take their money and put it under a mattress,” Boyd said.

Boyd's experience and ability to keep his clients on task while forming new member relationships were among the reasons he was recently named the top financial adviser for 2009 by CUSO Financial Services LP, the San Diego-based credit union broker-dealer and investment advisory firm. Boyd manages $100 million in assets with nearly $40 million of that coming from new business in 2009, he said. He was bringing in $3 million in new assets each month. He, along with several of his peers, will be honored by CFS at an awards ceremony this summer.

Even though they took a beating in 2008, the bond fund market came back strong last year up 15%-20%, Boyd said. He steered members there and toward equities. He acknowledged that when you're 65 or 75 years old, the portions are not that big. Short-term income funds were another recommendation for those who had completely turned their back on taking any risks with the market.

“I definitely had to do a lot more explaining and proving how programs worked,” Boyd recalled. “Most of the people I had that had issues had money with someone else. My clients as a whole did not suffer.”

Tim Werdel, also a financial adviser at Kern Schools FCU, saw fear and answered more questions from his clients particularly because he worked with a generation of people who probably never thought twice about the safety and soundness of FDIC-backed funds.

“This recession was unique in that it happened in the financial sector,” Werdel said. “People were used to easy credit and people went way over their deposit limits. I think people have permanently changed their mentality. They're no longer figuring on buying that third car.”

For his efforts, Werdel will also recognized by CFS, which named him the 2009 recipient of its Silver Pacesetter award for meeting the criteria of “a perfect balance of focus, commitment, and the best practice of serving clients and members.”

Werdel's member-clients run the gamut with the bulk of them with assets in the $500,000 to $1 million range. Most are over the age of 50 and many have their eye on retirement. The recession has changed some traditional methods, he noticed. For instance, some of his clients in their 60s were forced into retirement when they were laid off. Others are not interested in going out and starting all over again with a new job.

“With unemployment at 10%, the reality is they are retiring younger and that's not by choice,” Werdel said.

The closer a member is to retirement, the more conservative the approach, Werdel explained. Eighty percent of his clients are within 10 years of retirement and most have been diligent about building up their savings but were unclear about how to manage it so they can continue live comfortably. Fixed assets such as certificates of deposits, annuities and bonds offered less risk, he said. He acknowledged they might not be what's best for them when the markets are at an all-time high. Werdel's experience has shown him that people tend to lean away from risk during these highs rather than buy. Depending on a member's age, say someone in their 30s with time on their side to build up a 401(k) or an individual retirement account, Werdel may suggest a more aggressive stance.

“I've done a lot of reassuring especially during this recession. For older folks who are 75 to 85 years old living on a fixed income, it becomes difficult,” Werdel said. “To save the economy, you have to lower interest rates but it hurts people who didn't have a mortgage or a lot of debt.”

As rates rise, the mortgage market may take a hit again, Werdel said. This matters to people who are used to seeing CDs that pay 5% to 6%.

Knowing what approaches to tailor depending on their client's short and long-term needs is why Boyd and Werdel stand out among the pack, said Valorie Seyfert, CEO of CU-broker dealer CFS.

“Of course, the first point is that they have each hit the revenue numbers needed to reach these top Pacesetter levels. But what's more important is why they have hit those numbers. Using the tools, strategies and support available at CFS, the KSFCU advisors and program manager have taken a very entrepreneurial stance and have integrated into the core offerings of the credit union a successful process to efficiently serve all the investors in the credit union,” Seyfert said.

Brokered CDs and 403b accounts are two ways new money has come to Kern Schools, Seyfert noted, adding the CU's investment program's success has hinged on offering products and services that best suits the cooperative's unique member base.

Both Boyd and Werdel said they expect to see a repeat of 2009's conversations and guidance this year among their respective clients. If government intervention leads to an increase in payments to the FDIC and NCUA, that could lower interest rates, Boyd said. To make up those losses, banks may lower things like CD rates. Credit unions may follow suit and end up having to get rid of excess money. For some members, it may mean taking their funds elsewhere.

“With that said, it will continue to be a strong year for credit unions because they are dependent on income through CDs and things like that,” Boyd said. “Last year, you saw people who had never deposited outside of a bank do so for the first time.”

Boyd said it also helps to have a support system through CUSOs like CFS. His previous stints at Wells Fargo and Washington Mutual don't compare to the CU environment, he pointed out. The cutthroat atmosphere is nonexistent and Kern Schools staff is much friendlier to brokers than the banks were.

“People love credit unions. That's a good portion of my success,” Werdel said.

–msamaad@cutimes.com

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Recession Stifles Risk, Members Cling to Conservative Investments

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