Solid Investment Programs Bolster Financial Return and Deepen Member Relationships

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By Ed Dominguez, CFP

3 minutes

Here are several suggestions for your success.

Sponsored by LPL Financial

Many credit unions struggle with how to grow the impact of their investment programs—both from a member experience and financial perspective. Too frequently investment programs are viewed as a convenient member benefit, but rarely as an impactful source of non-interest income.

Each year research and consulting firm Kehrer Bielan publishes a study titled “The Value of Investment Services to a Bank or Credit Union,” which helps quantify the incremental value–beyond revenue–of an investment program back to the financial cooperative. Kehrer Bielan has found that most credit union members are doing investment business, but only a relatively small number are engaged in that business with their credit union’s investment program. This would seem to suggest this is a massive missed opportunity for many credit unions.

And the missed opportunity is bigger yet. Kehrer Bielan has also determined that members who have investment relationships with their credit union are typically the most loyal and profitable—and use the most credit union products. In short, investment client members are your best, most profitable members. The challenge is how to create more of them.

Finding Success With an Investment Program for Members

Where to start? In my experience, the success of the investment program starts with the buy-in at the top of the organization. When the whole organization knows that the CEO and board are committed to the growth of the program, that engagement will resonate with the rest of your credit union’s team.

Making the investment program part of the credit union’s overall approach to financial wellness and member education is another way to help drive awareness of the program and boost its impact. The credit union program’s financial advisors have passed several securities and insurance licensing exams. Many of them have such advanced designations as Certified Financial Planner. Tapping into this experience and subject matter expertise to the benefit of all members is another relatively easy way to increase the program’s impact.

One other idea to consider: Add more advisors. The industry rule of thumb is one financial advisor per $200 million in credit union deposits. That doesn’t mean the advisor’s goal is to convert those deposits into investment relationships. The advisor/deposit ratio is a liquid net worth metric used to help determine an optimal coverage model for your institution. Many institutions look at the costs associated with hiring more financial advisors and feel, given the low-yield environment the industry has been operating in for years, that those resource dollars would be better spent on hiring more lenders or other employees whose return on investment is more easily understood. However, this resource-constrained approach means that the investment program never grows at the same rate the credit union grows. With additional investment in staffing, impact and results can grow dramatically and quickly.

Picking an Investment Program Partner

Once you’re focused on growing your investment program, it’s critical that you have a partner who is committed to your success. The partner and approach the credit union uses to offer investment services are highly important. Credit unions need a partner with the scale and experience to not only provide a meaningful member experience today but also with the resources and flexibility to grow and innovate into the future.

Sometimes, due to membership issues or regulations, credit unions operate their own broker-dealer or registered investment advisory. Increasingly, the complexity, expense, and risk of the investment business are making this model more challenging. Finding a partner to outsource risk and technology expense not only positively impacts the credit union but allows for the organization to repurpose administrative roles into growth-oriented, member-facing ones.

With proper investment, support and partnership, your investment program can become a meaningful and growing source of non-interest income while positively impacting member loyalty and helping ensure your credit union is more relevant into the future.

As VP/business development for CUES Supplier member LPL Financial, San Diego, Ed Dominguez, CFP, is responsible for consulting with credit unions around unifying their entire wealth management business at LPL. He has more than two decades of industry experience with a career that’s evolved from stockbroker to financial advisor, program leadership and consulting. He has extensive experience as a financial advisor and investment program manager in both bank and credit union environments.

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