CUSOs Can Step Out of Traditional Mold to Meet Members' Retirement Needs

According to a recent report from the Board of Governors of the Federal Reserve Systems and the Financial Service Fact Book, credit unions' share of individual retirement accounts has been steadily declining, falling from 2.1% in 2002 to 1.3% in 2006. Incidentally, commercial banks also saw a 1.7 percentage point drop in IRA market share–6.5% versus 4.8% in 2006.

These compelling statistics provide credit unions with good reason to not only pause but also take stock and position themselves to drive change in a new era. Baby boomers are entering their retirement years in droves. Indeed, the U.S. Census Bureau reported that 7,918 baby boomers turned 60 each day last year.

Now ask yourself, “How equipped is my credit union to help the post World War II generation prepare for their future?” And furthermore, “Why would members who receive lump sum distributions or have other IRA account balances be encouraged to seek retirement income planning from my credit union?”

During 2007, UNFCU Financial Advisors dedicated significant resources toward two primary goals: developing simple, turnkey solutions for credit unions and their members in the retirement planning arena and making new programs available to CUs with members overseas.

Simply stated, new programs that generate low-cost annuity payments for life or a specific term regardless of economic conditions must be considered to compete effectively with banks, brokerages and investment companies. For credit unions, growth in IRA products may even cause members to expand their use of other credit union products and services.

A Wharton Study conducted last summer noted that lifetime income annuities are the best asset class for financial security in retirement. “Recent innovations in income annuities, such as annual inflation adjustments, legacy benefits, and access to capital in emergencies, have helped elevate the products to a desirable asset class in retirement,” concluded the report. It stated, “living too long is fast becoming the major financial risk of the 21st century.”

According to the Financial Planning Association, as printed in the Oct. 17, 2007 issue of Credit Union Times, at least 25% of individual retirement account rollover activity is expected in 2008. This creates a unique opportunity for credit unions. While many financial cooperatives are using contemporary approaches to meet member retirement planning needs, credit unions can improve upon traditional products. This is further reason why credit unions should consider expanding their solutions to offer members immediate fixed-income annuities as a core component of an overall retirement income distribution plan, along with other appropriate investment products.

Today, more than ever before credit unions need to listen to their members' feedback and address a chief concern–growth. Often, it is not just about thinking outside the box, but about thinking outside the country. Helping credit unions to broaden their product mix is a major focus of UNFCU Financial Advisors and we have leveraged the 60-year history of UNFCU to build a network of companies to provide niche product offerings, including investment options, real estate relocation services and global insurance products, including employee benefits, home, auto and commercial property insurance.

And in responding to members globally, UNFCU, along with many credit unions with members overseas and in border states, is endeavoring to offer financial services wherever members are located. With internationally based members, it is not unusual for UNFCU to receive inquiries about auto insurance from United Nations staff in Kosovo, Serbia or elsewhere.

With half of their members living in Latin America, Washington, D.C.-based OAS FCU, PAHO/WHO FCU, and IDB IIC FCU looked to go beyond U.S. models to improve their members' experience. Our approach has always been, if you want it we can find it,” said Miguel Boluda, Jr., CEO of $158 million PAHO/WHO FCU, “and by partnering with UNFCU, we are now better positioned to do just that.” According to Boluda, PAHO/WHO FCU's 4,100 members reside in 57 countries, including those in South and Central America, and the Caribbean, as well as in Geneva, Switzerland, the location of the World Health Organization.

For members in the U.S. who are not citizens, UNFCU Financial Advisors offer a suite of offshore products designed to meet the needs of an international member, requiring specialized investment advisors and product selection through a CUSO..

In addition to Expat insurance in most countries, members living abroad can also seek multi-currency solutions with UNFCU Financial Advisors. Finally, our goal is to lay the foundation for UNFCU to open offices in Austria, Switzerland and Italy. These locations will present on-site investment and insurance services in U.S. dollars, euros and Swiss Francs and will also have the capability to offer investments in other currencies.

Given these shifting demographics, can credit unions become or continue to remain a one-stop shop for their members? The answer is a resounding,” Yes.”

You have introduced comprehensive lending programs, expanded insurance offerings, and may now want to consider moving into relocation services. Finding a new home, learning the requirements, such as lease terms and all about the neighborhood just became a bit easier for our international members moving to one of the toughest markets around–New York City. “Welcome Home,” a relocation initiative, is just another growth solution for your credit unions.

Globalization and the increased need for innovative retirement solutions that address boomers' longer life expectancies provide credit unions with greater impetus to step up the pace of their own evolution. According to an Oct. 26, 2007 Wall Street Journal article citing a GMAC Global Research Services survey, 69% of multinational companies sent more executives abroad in 2006 than in the year prior.

With more credit union members and potential members residing overseas, CUSOs offer the means to broaden the scope of service to their members and help other credit unions large and small best plan for everyone's Golden Years.