Market Tumbles: CUs Assuage Members On Edge
After weeks of stock market drops that sent waves of fear around the world, it appears some of those losses have been replaced with gains.
Still, the frenzy led some members to question everything from the condition of their retirement plans to whether they would have paychecks as Washington battled over a debt ceiling impasse.
The Maine Credit Union League said the state’s credit unions were fielding questions from members about the recent debt-ceiling struggles, stock market volatility and the downgrading of the country's credit rating by Standard & Poor's.
“We are seeing some of what we saw in 2008 with an increase in deposits, especially from the more risk-averse members. I am providing our staff with timely and new information so they can pass it along to our members who have questions,” Kyle Casburn, president/CEO of Seaboard Federal Credit Union in Bucksport, Maine, told the league.
At the $101 million CU, Casburn said “there is genuine concern from members and staff about the stock market plunge and the credit downgrade.”
Thrown in the mix of the markets’ turmoil, was the now-resolved debt ceiling battle. The Maine league said it caused the most concern to members with many of the state’s CUs reporting receiving questions regarding federally insured deposits and whether this would continue if no agreement had been reached.
Jim Lemieux, president/CEO of the $66 million Sebasticook Valley Federal Credit Union in Pittsfield, Maine, said he talked to 25 people who wanted to know if the government would pay them this month, the league said.
MCUL League President John Murphy said, “Had Congress failed to reach an agreement, many credit unions I spoke with across the state were preparing to assist their members with no-interest loans and/or cover their federal checks until an agreement was reached.”
Meanwhile, open and frequent communication between advisers and clients “will help cooler heads prevail,” said Steve Hollenbeck, senior vice president of marketing at CUSO Financial Services LP and Sorrento Pacific Financial LLC.
“Given the uncertain underpinnings that were propping up markets coming out of the [2008-2009] meltdown and heading into the debt ceiling [and] S&P downgrade issue, I’m not surprised that we’re seeing significant volatility lately,” Hollenbeck said.
Overall, CFS, a San Diego-based credit union-owned broker-dealer and investment advisory firm, is seeing a continued flow of dollars into the markets, Hollenbeck said. Many clients are paring back their equity exposure and moving a bit more toward high quality bonds, including U.S. Treasuries and high-grade corporate issues, he added.
“It seems that, overall, clients are doing a good job of working with their advisers to shore up their portfolios but also keeping focused on their long-term goals,” Hollenbeck said. “As was the case in ’08 and ’09, the best thing advisers can do is communicate proactively with their clients and resist the temptation to hide.”
That approach would include an offer to get together for an account review in order to ensure that portfolios are still in line with long-term objectives, he offered.