MADISON, Wis. (10/2/13)--Investment and insurance products are the largest potential untapped source of member-friendly, non-interest income for credit unions, attendees of CUNA Mutual Group's fourth annual Online Discovery Conference were told Tuesday.
"Growing your credit union's investment program is not only good business, but it's good for business," said Hendrix Niemann, managing director of practice and wealth management services for CUNA Brokerage Services, Inc.
Niemann's session, "Growing Your Investment Program to Increase Non-Interest Income and Member Loyalty," provided insights into why credit unions should offer an investment program.
To grow a credit union's investment program, the credit union must:
- Obtain senior management and board buy-in and commitment;
- Dedicate time and resources to member education; and
- Market the investment program to current and potential members.
"Offering a strong investment and insurance program pays dividends in multiple ways," Niemann said.
Credit unions lose an average of $165 on certificates of deposits but make an average of $177 by providing investment products to their members, according to recent Raddon Financial Group research. That means converting CDs to investment accounts can potentially result in a substantial increase to bottom-line revenue, while improving the capital ratio, Niemann told attendees.
Credit unions attract about 3% of their members' investment dollars, while almost half (46%) of members have investment accounts elsewhere, he added, citing Filene Research Institute statistics for 2012.
However, a recent Kehrer Saltzman & Associates study found that members who purchased investment and insurance products from their credit union were 40% more loyal than those who did not, and were two-thirds more likely to consider the credit union their primary financial institution.
"The importance of this 'stickiness factor' cannot be overemphasized," said Niemann. "Offering an investment program will lock in additional revenue for many years to come, and it's beneficial for members, too."
Older members need to be educated on retirement income planning and healthcare planning while younger members need help getting started with investing, he said.
"Who's going to give your members sound financial advice if you don't?" Niemann asked. "Credit unions need to start treating their investment programs as core products."
Niemann emphasized that marketing the program is key to its success. According to recent Raddon Financial Group research, 54% of credit union members did not know if their credit union offered an investment program, and 16% were not aware of their credit union's investment program.
"The statistics and demographics are in our favor; whether credit unions take advantage of this opportunity is yet to be seen, though," Niemann concluded.
Online Discovery is an annual conference sponsored by CUNA Mutual Group that attracts a national and international credit union audience of more than 1,300.