For You Strategic Strategists, Wise 53-Year-Olds, And More

Let's begin with some wisdom. At a recent credit union conference I heard one speaker refer not once, but twice to "strategic strategies." Those are not to be confused with "tactical tactics."

* How have deposits flowed into credit unions this year? In at least one state, to date it's been at least twice the rate that was expected.

John Buddle, president of Massachusetts Share Insurance Corp., which provides excess share insurance coverage in the Bay State, said the company reassesses client credit unions every six months. For 2007 it had projected it would collect an extra $1 million in assessments tied to increased deposits. In the first half of this year, it had already collected $986,000, said Buddle.

"It reflects that there are very large deposits coming into credit unions and that members value the excess deposit insurance," he explained.

Most deposit insurance funds strive for an equity ratio of at least $1.25 per $100 of deposits; MSIC has a ratio of $5.75. The Commonwealth has 79 state-chartered CUs and 20 federally chartered CUs; at year-end 2006 MSIC insured more than $1-billion in excess (above $100,000) deposits at Massachusetts' credit unions. Insuring excess deposits is not an option in the state for some; a statute requires that all state charters insure with MSIC. There are also two other excess deposit insurers in the state, one for savings banks and another for cooperative savings banks.

Buddle said MSIC is occasionally contacted by credit unions in other states to obtain excess deposit insurance, but the company is prohibited from offering the coverage outside Massachusetts. In those cases it refers the credit unions to Excess Share Insurance Corp., Dublin, Ohio, the unit of American Share Insurance.

With all those deposits coming across the teller counter, it doesn't mean marketing efforts across Massachusetts are consumed by pushing loans. As Buddle noted, some credit unions continue to actively chase deposits.

* At what age do you make your best financial decisions? Credit unions have all but pushed plastic surgery clinics aside with their obsession with youth, particularly members of the much-coveted Gen X and Gen Y. But all of that has much to do with their future contributions to the cooperative (and the cooperative's future contributions to them) and little to do with their financial savvy. Indeed, part of the reason credit unions have reached out to X, Y and soon-to-be Z is that they don't know their financial A, B and Cs.

So when are you smartest about money? Some researchers believe they have an answer, and, surprise, it's not when you're also a regular buyer of acne medicine.

Four economists have released a study in which they examined at what age a person makes the smartest financial decisions. Their finding: age 53. The findings were assembled by David Laibson of Harvard, Xavier Gabaix of New York University, John Driscoll of the Federal Reserve Board and Sumit Agarwal of the Federal Reserve Bank of Chicago. How did the quartet arrive at age 53 as the age at which financial wisdom peaks? They weighed a number of factors, including the APR borrowers paid on home equity loans and lines, auto loans, and personal and small business credit cards. In addition, they took a long look at how consumers respond to balance transfer offers from the various credit card issuers, how often financial consumers get nailed by late fees, cash advance fees and fees for going over their limit. Once they also controlled other factors, the researchers observed that "middle-aged adults borrow at lower interest rates and pay fewer fees compared to both younger and older adults."

If you have children they may have taken time to remind you that you are losing brain cells every day and have been for some time. The researchers even weighted that (it's known as a diminishment in analytic performance and it occurs around age 20), but then noted that all of that is offset by experience. But, alas, there is a bit of bad news here, too, with the researchers saying that the value of experience also begins to diminish after a person passes their early 50s.

So why does all this matter to a credit union, other than its value as being interesting? Because, the researchers observed, retirement planning and the managing of finances has become a lot more sophisticated than it used to be. Post-retirement financial planning no longer is about taking that monthly pension check and handing it over to a favorite teller for deposit. Many, if not most retirees, now must actively manage their finances and pore over what are often complex statements that arrive every month.

For credit unions, demand for retirement planning advice is likely to only grow more important. What might also be valuable some night would be to bring together those whose analytic performance is still high-performing (Gen X, Gen Y) with a group of those who have lots of experience to share (Boomers). Both would be better for it.

* If you're in Las Vegas anytime soon for one of the biweekly credit union meetings there, take a day for and drive over to the Grand Canyon Skywalk (you can also fly). This is the glass-bottomed "bridge" that hangs 3,000 feet above the canyon floor (go to grandcanyonskywalk.com to take a look). But if you're one of those underserved folks, be prepared: it's an incredible $75 a pop. But, as one worker explained to me, it does include a "free" lunch.

Frank J. Diekmann can be reached at fdiekmann<at>cujournal.com.