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Robust technology can provide edge for credit unions considering investment programs

The financial services industry has grown increasingly competitive over the years, causing banks and credit unions to vie for wallet share by diversifying their product mix in hopes of attracting new customers and retaining existing ones. One of the ways in which they are attempting to accomplish that objective is by offering investment and insurance services to their customers.

But simply offering these services isn't enough to ensure real success. In order to compete at the highest level with the biggest and strongest competitors and provide the services that customers want and need, these institutions will need an edge. And that edge comes down to superior technology solutions, according to Steve Hollenbeck, senior vice president of marketing for CUSO Financial Services LP (CFS), a registered investment advisor and full service broker/dealer serving the credit union industry exclusively.

"Credit unions that want to diversify and become involved in the investment business will need a robust technology platform in order to provide a level of member service that is not only competitive with other institutions but exceeds what they have to offer," Hollenbeck said. "The ultimate goal for credit unions is to better serve their members and they do that by offering investment programs that utilize the most advanced technologies as a means of providing member convenience, accessibility and ease of use."

A superior technology platform should include the ability to provide the program's registered representatives with financial planning software that is flexible yet offers a great deal of consistency. Hollenbeck explained that through the process of financial profiling, a representative works with a client to help determine his or her specific risk tolerance. Once determined, the rep can then outline an asset allocation model that best matches the client's risk profile as well as present a financial plan that can be used as a roadmap in pursuit of investment goals.

"Consistency comes into the picture because with a tech-based tool, generally speaking, allocation models recommended for clients of similar risk tolerances will have similar characteristics," Hollenbeck explained. "That provides consistency of approach, however there is still room for fine tuning, if necessary, to further customize the plan for the client. This type of technology solution helps rationalize and keep things consistent in terms of where clients end up, given their propensity or aversion to risk."

Having superior technological capabilities also offers benefits to the back office from a compliance perspective, Hollenbeck said. Using a fully integrated planning tool, once a rep meets with a client and completes a financial plan, that profile is saved to the client's data base record. This provides a copy of the profile and plan so that the compliance department can compare the recommended allocation to the actual holdings in the account to ensure consistency.

"Using an integrated planning solution allows the compliance group to more easily review activity on the account to determine if allocation is consistent with the plan," he said. "If something appears out of alignment, the rep can be asked to substantiate any perceived deviations. Actually, CFS has been using a similar process for storing and reviewing account documentation since our inception"

A good profiling tool will also allow reps to develop the best possible financial picture of a client's current situation because it requires them to ask questions, and forces clients to provide answers, that will help them build a comprehensive financial plan together.

It also can generate potential cross-selling opportunities, especially in a financial institution environment. By using the profiling tool, reps can uncover assets that may be held elsewhere and can use that opportunity to convince the client to move them to their institution.

"The quantitative aspect of profiling is ultimately tech driven because it's software," Hollenbeck said. "It directs a rep who is well-trained on this tool to ask the key questions that result in it also being an effective cross-selling and compliance tool. It's not just a matter of the credit union gathering assets to invest today, it's also about bringing in assets from other institutions and moving them into other credit union products or services as appropriate. The beauty of having a program that is technology driven is that it opens up these cross-selling opportunities as part of the process of planning. A lot of that process can be completed through the use of technology."

Another important capability that robust technology can provide is referral tracking across various credit union products and services. What used to be done with paper can now be accomplished with an electronic audit trail in a system for all parties to see and act upon. Hollenbeck says that, most importantly, this type of system, as opposed to a less sophisticated "paper slip" referral system, creates accountability since referrals and their status are visible by all levels of management . The application keeps track of the status of referrals and can generate reports that provide a breakdown of referrals from each source and the disposition of them.

It also allows managers and reps to acknowledge employees who are meeting referral goals and to identify those who may need a little nudge or additional training to bring their referrals up to a more acceptable level.

"To the extent that you can get a piece of software to help track referrals and disposition, you've added both efficiency and accountability," Hollenbeck said. "There is also a compliance benefit in that the more you can document, the better off you are."

What's more, strong technology helps facilitate the integration of the credit union's investment program into its core product offerings by giving it equal shelf space among its other products and services. It can provide members with the ability to see their complete financial picture and total relationship with the credit union using a single sign-on through the credit union web site. That capability that technology brings helps serve members better, which results in improved member retention and lifelong relationships. And that's what helps grow assets.

"The bottom line is that a strong technology platform is one of the keystone components of a successful investment program, so credit unions should take full advantage of it," Hollenbeck said. "If they want to get into this business and are talking to brokerage firms about what they can offer as partners, credit unions should be asking if the firm offers these types of tools and more. Ask what their commitment is to technology, not just today but in the future, and what they have in place to help reps be more productive in providing members with the best possible service."


Barrett is a staff writer at Beck Ellman Heald

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