SILVERDALE, Wash. — For a small credit union operating in a remote region, offering competitive banking and investing services can be difficult, but Connection Credit Union is using a new cloud-based software solution to help close the gap.
"The idea of offering an investment service to our members has been on my mind for some time," said Connection CU CEO and President, Scott Prior. "But we are in the same boat like a lot of small credit unions that aren't big enough to have a [dedicated] investment advisor."
The $25 million-asset credit union supporting 2,800 members and three branches is located on a peninsula, which requires a ferry ride to Seattle. "We used to share a financial advisor with three other credit unions but that didn't work," recalled Prior. "And the next closest credit union to us is six times bigger, so that partnership wouldn't work either."
Last year at a regional industry conference, Prior ran across Joe Cianciolo, vice president of business development for FutureAdvisor. After watching a brief demonstration of how the wealth management software works and the value it could bring to members, Prior was ready to explore options.
"Connection Credit Union was actually FutureAdvisor's first credit union partner," said Cianciolo. He added that the firm is currently negotiating partnership agreements with several other credit unions. "The value proposition for the individual credit union depends upon the credit union's size and current offerings to its members, but it is typically a mix of several benefits." Services include oversight of existing IRAs, 401(k)s, joint accounts, and taxable accounts as well as comprehensive long-term portfolios.
According to NAFCU, less than 20% of credit unions currently provide the option of full-service advisory and wealth management services to their members. This is compared to 83% of large banks, 63% of medium-sized banks and 49% of small banks.
"Partnering with FutureAdvisor allows these credit unions to compete by providing members with a high-quality wealth management solution at no cost to the credit union," said Cianciolo.
Investment Portfolio Control
With more members looking to conduct transactions via home computing, smartphones and tablets, the traditional face-to-face meeting with a financial advisor is slowly becoming outdated, or not a preferred method of interaction, Cianciolo suggested.
"For those credit unions that do have an in-branch wealth management solution, member engagement is typically well below 5% of members," he said. "Our online-based model provides additional engagement with members who do not frequently visit the credit union branch or do not engage with the in-branch wealth managers because they don't believe they qualify, don't want to invest the time it takes to sit down with a human advisor, or havetrepidation about sitting across from a human advisor."
Connection CU rolled out the service only a few weeks ago, but beta tested on employees, who were trained and educated on the solution. "Our staff was impressed by how simple it was to use, but also what they were able to do with regard to investing and wealth management," said Prior adding, "And they had no knowledge of how to do investing — it's complicated."
With regard to start-up costs and investment, Prior said the dollar amount has so far been zero. FutureAdvisor, he noted, handles all the legwork. Depending on the level of integration the credit union desires, the rollout can take as little as one week or as long as one month. "Our technology and development team do the majority of the work for the rollout, and we do it at no cost to the credit union," said Cianciolo.
If a credit union requires "a low level of integration," FutureAdvisor only requires that the appropriate links are added to the credit union's website. Connection CU's integration was more involved and required FutureAdvisor to be integrated with its online banking system for single sign-on. "For this, several weeks of development work may be required, but again, FutureAdvisor does not charge any fee for this effort," said Cianciolo.
In the coming months, Prior anticipates investing money in marketing and education. Much like the newly offered MoneyDesktop, which offers members financial management tools and has been widely adopted, Prior thinks members will quickly warm to FutureAdvisors. There is a free version and a "managed" version for $9.99 per month. The latter ensures that all member wealth management activities are expertly handled by FutureAdvisor.
"Non-interest fee income has been on the decline and we have to look for creative ways to tap into it, while providing members' with opportunities," said Prior. "As a small credit union, we are scratching and clawing for every dime we can get."