What is competition? According to the Business Dictionary it is, "a rivalry in which every seller tries to get what other sellers are seeking at the same time; sales, profit and market share by offering the best practicable combination of price, quality and service."
If one accepts this definition, then the important aspects for a credit union would be the three following components:
- Price–because we pride ourselves on being a value proposition for our members.
- Quality–member advocacy is ingrained in the credit union culture, so quality is very important.
- Service–we are always there for our members.
The financial services industry has gone through quite an evolution in the last few years. Discount brokerages advertise on television all the time. Consumers are asked why they should pay full commissions on their trades. Wire houses are being acquired by large commercial banks which facilitate an individual having all of their financial needs served by one organization from checking accounts and certificates to loans and on to investments and insurance.
Then there are the independent financial planners, insurance agents and CPAs, many of whom are offering the same investments and insurance products that we provide.
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So who is our competition? There is no easy answer to this question. The obvious example would be other financial institutions, namely banks. Even those who were late to add investment advice to their offerings have gotten into the arena. It is seldom that one finds an individual with a relationship with only one financial institution. If that were not true then we would not concentrate on becoming our members' primary financial institution.
Many banks have become very adept at uncovering assets and referring those with investment needs to their in-house advisers. In fact, Chase Banks has upgraded many of their platform reps by hiring Series 7advisers to offer loans and investments.
What about the insurance agent who writes your home and auto policies? Many agents are either securities licensed or have a relationship with someone who is. A very successful example of this is the United Services Automobile Administration, which is very adept at cross-selling and is even offering loans to their members. They have a culture of cross-selling and expect their employees to look for all opportunities
Don't forget about the member's CPA. Much like insurance agents, some are licensed or have a relationship with a licensed individual. Because all of the client's financial information is known to them so that they can be advised on tax situations, it can seem like a practical solution to ask them for investing advice also.
Scott Trade, Schwab, Fidelity and E-Trade are all heavy users of television advertisements. These discount brokers have been expanding their services to include advising. Schwab has opened offices for face-to-face sales versus an individual just calling in and making a trade or executing one online. And, who hasn't seen the Fidelity green line? Those ads are strictly about planning and not reduced fees.
With all of this being said, how do credit unions compete with this array of options that are being offered to our members? There have been a few articles lately about banks being seen as better service providers than credit unions. There is not a consensus on this, but the fact that it is being discussed should be a wake-up call.
Many credit unions object to the word "sales." Why is that? Quite often it is the connotation of pushing an unneeded product onto a vulnerable individual. But, what if a member needs a product and we don't offer it because we don't want to "sell" something? There are many examples of this: the young father with little or no life insurance who dies in an accident leaving his family without financial security, the individual who can no longer live on their own but has no way to pay for the necessary care or the worker who has given little thought to maintaining their standard of living in retirement. The list can go on and on.
Where does selling come into this equation? Sales start with uncovering a need. All member-facing employees should be doing this. Member service representatives should be helping the member find the appropriate checking or certificate account. Loan officers explain the different types of loans so that the borrower can select the best loan to fit their needs. Financial advisers find out the investor's goals, assets and risk tolerance to offer products that fit their individual needs and comfort zone.
But it doesn't stop there. Most MSRs know to look for loan opportunities but how many think about investment needs? Loan officers have the best view of the member's personal financial situation, but do they look at their checking account, credit cards and investments to see if the credit union can offer a better solution?
The same may be said of some financial advisers. All of the needs should be uncovered so that if a new loan would reduce the costs or, if they don't have enough liquid assets, a credit union account could be used for emergency funds.
If we don't want these competitors to make inroads into credit union products, we need to be the one-stop answer to all of our members' financial needs. Cross train all of the employees so that they know what to look for when it comes to a product with which they are not familiar. Don't let anyone out the door until you are certain that you have uncovered all of the financial needs your credit union can satisfy.
Sherry Reams is managing director of Flagship Financial Group, the insurance and investment program at American Airlines Credit Union.
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