Things have changed when it comes to strategic planning, according to Sam Kilmer.

Kilmer, senior director for Scottsdale, Ariz.-based Cornerstone Advisors, said historically, credit unions have considered the risk management process and the strategic planning process to be different conversations. In today's climate, he insisted, the two need to be part of the same conversation.

"There has long been a tendency toward minimizing risk by credit unions," he assessed. "The problem, which has cropped up in the last two or three years or so, is the competition is better. Five years ago, the outlook was, 'The competition is big banks and they suck, so we will take bank customers because we are a credit union and we are a better deal.' Today, big banks are growing faster. They have gotten a lot better, especially due to heavy investment in making their mobile experience top-notch."

Yes, credit union people are "nicer," Kilmer acknowledged, but if the public fails to come into CU branches to find this out, what does it matter?

"As much as I hate to make overgeneralizations about demographic groups, mobile is much more important than it used to be, especially to millennials. Banks have closed the gap in customer satisfaction in the last five years. They are better than they used to be and they keep getting better – and the national data shows they are growing faster."

There used to be an earnings model credit unions relied on for a long time: solid loan volume, funded by branch-based deposits, which generate fee income, driving a certain amount of earnings and net worth. Kilmer said today he refers to that as the "old earnings model."

Under the "old earnings model," Kilmer said there were credit unions that found they were particularly good at one type of lending, and they developed concentrations in those area – and in many cases, it was indirect auto lending. The old model, he argued, creates "certain problems," including concentration risk and declining branch volumes as mobile becomes the primary channel.

"Today, there are fewer opportunities to interact with members – interactions that used to lead to cross-sell opportunities," he said. "This is a strategic problem for credit unions, which may not have the talent in other areas to create digital sales. Yes, credit unions have technology vendors, but do they have the people who can engineer a successful process? Is someone in charge of it? We used to hold branch managers accountable for sales, but who is the equivalent person in charge of sales by mobile?"

Another issue Kilmer said CUs need to address in their 2016 strategic planning sessions is: the industry has become reliant on interchange income, which is under pressure. He said there is "almost no scenario" in which the per-transaction number goes up in the future. The best credit unions can do, Kilmer advised, is to get more members to carry their credit union plastic cards and/or to use those cards more frequently.

"What to do about all these risks? Think about how to create/engineer future value," he suggested. "Think about how to reach out to members who do not come into branches. Create a way to risk-test new strategies, and risk-test keeping the same strategies."

While CUs are used to risk-testing their loan portfolios, Kilmer said they need to align their strategic planning with risk management. "Make sure strategies are being executed. Have project leadership in place with documentation and 'strategy owners' who will report to the board on their progress. This also accomplishes leadership development – put one or two people in charge of following up on executing a particular strategy, such as improving mortgage lending. Be ambitious, but then be specific enough to show the ambition is real. Use plain language that is understandable by everyone in the credit union and on the board."

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