Anyone knowledgeable about earth's seasonal cycle will look at this headline and retort: “No, winter actually begins on Dec. 21.” (And no, this is not a “Game of Thrones” reference, for those keeping score). The seasons I am referring to are societal seasonal cycles – transitions from prosperity, to struggle, to prosperity once again.

Regulations Chase a Changing Society

Rebecca Ryan in her book “ReGENERATION, A Manifesto for America's Next Leaders” describes this cycle. America started in a winter period (the American Revolution), and the nation has completed three entire spring-summer-fall-winter cycles. Fast forward to recent memory. Ryan writes, “Winter crashed into America when two planes hit the World Trade Center on September 11, 2001. American's long-running bull market had ground to a halt. Wall Street hustled to find new ways to make money and prop up America's financial system. The housing bubble was born, preceding the economic meltdown of 2008 and subsequent Great Recession.”

So, what does this have to do with regulation? My hypothesis is:

Society is at an inflection point. The growing economic inequality and inability of low and middle-income Americans to just get by is unsustainable. Society will demand greater and more equitable access to economic opportunity and prosperity.

Government regulation follows societal drivers. Patterns show it does this by: 1) Forcing institutional change to align with society's mandate, or 2) Enabling forward-thinking institutions to thrive and solidify their competitive advantage.

Credit unions focusing on mission over margin will establish long-term success for themselves AND their members. Those who actively and strategically choose to address economic inequality and serve the financially vulnerable where others do not will not only live their missions by helping struggling consumers survive the current “winter,” but also be best positioned to thrive when regulations nudge toward the path of societal progress.

The Chill of Winter Eventually Thaws

Ryan explains that societal winter manifests itself in many forms. Who among us has not been affected by:

Our loved ones being laid off and struggling to find work;
Our soldiers sent back for a third (or fourth!) tour of duty;
Our lenders saying our homes aren't worth what we paid for them; our equity being vanished;
Our kids earning college degrees crushed by debt and being unable to find jobs; or
Our parents who planned to retire by now but are still working, afraid there won't be enough saved to live on.

Did the chill of winter permeate your body when reading those statements? Like the climatic seasons of the planet, spring will return to renew and invigorate the nation.

Ryan further demonstrates that things do get better, but how society supports the transition to spring determines the level of prosperity and equality experienced. These seasonal changes won't happen unprovoked; people and the institutions they create are the true forces of nature.

Even if you don't believe in this seasonal theory of American society, look around. Times are tough, economic systems the country has held onto for decades are in upheaval, and change is coming. We've gone through a divisive presidential election fueled by masses that are fed up with the current system. Income inequality continues to grow and is not expected to level off until 2035, according to a Congressional Budget Office report. About one in 10 student borrowers are behind on repaying the loans, the highest delinquency rate of any type of loan tracked by the New York Federal Reserve's quarterly households debt report.

Winter's ice is cracking society's seams and something's got to give. Like Ryan, I believe society is at an inflection point and we are on the cusp of melting into spring.

Focus on Where Society Is Heading, Not the Short-Term Regulatory Environment

There is a pattern of not-so-subtle action in our history as government catches up to a society demanding more equity for all. Reference these prominent examples of government intervention forcing change regarding:

Racial justice and equality: The Emancipation Proclamation of 1863 and the Voting Rights Act of 1965.
Financial justice and security: The Banking Act and Securities Act of 1933 and the Dodd-Frank Act of 2010.

Regulation need not force industry's hand. Both right and left can agree it's better when government doesn't force action but rather enables society to take care of itself. One familiar example of government action enabling industry was the Federal Credit Union Act of 1934, which jump-started the credit union movement.

While regulations are in constant flux (for example, calls for repeal of financial regulations under the current presidential administration), if the industry takes a step back and looks along a multi-generational time horizon, it will see society marching toward America's next spring in the form of support for greater economic opportunity for all. Regulations will follow this march.

Some financial institutions are acting on this horizon and establishing themselves as leaders in supporting transition. Need proof? Despite the current administration's roll-back of the Fiduciary Rule, a poll by Fidelity Investments found that 63% of financial advisors said the administration's postponement of the rule would have little to no impact on their efforts to comply. These brave visionaries see the societal writing on the wall and are putting themselves at a long-term competitive advantage despite the temporary fluctuations in regulation.

The Will to Shape the Future, Not Let the Future Shape You

Credit unions, by definition, exist to serve all members fairly and equally. Keeping both eyes on year-to-year regulatory shifts may help keep the ship afloat for today, but a reactive stance makes for a poor long-term strategy and leaves a tremendous opportunity on the table.

Keeping an eye on societal trends puts credit unions one step in front of the regulations. History tells us society shapes regulation, not the other way around. And if credit unions look at where society is heading, they'll see that the members they serve are hurting. Those with the will to shape the future will take bold action to frame a brighter future, recognize it as the only path forward, and deem any other path as far riskier both for the business and for the community.

The Choice Is Yours

Credit unions can wait for regulations to mandate support of financially vulnerable populations, or use the regulations to their advantage when said regulations inevitably enable, uplift, and facilitate financial equity and inclusion.

Those that choose to act now to support the un- and underbanked will be future-ready. Some will say that this is being on the right side of history. Others will say this is having strategic business foresight, developing a competitive advantage, and serving an untapped market in a highly competitive financial services marketplace.

Ryan in “ReGENERATION” states, “Americans alive during this winter have a noble task: To think and work and act not for ourselves (because many of us may not be alive when spring comes again). We must act with the wisdom and grace to do our best for our children, and theirs.” Vulnerable consumers have always needed credit unions' help and will continue to in the future. The will to look beyond current regulatory challenges and act as a leader pressing for a more just and equitable financial future takes guts.

Spring is coming. Will you be ready?

Adam Lee is Incubator Director for the Filene Research Institute. He can be reached at 608-661-3747 or adaml@filene.org.

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Winter Is Here: Are You Preparing for Spring?

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