Make Wealth Management a Core Service

Make Wealth Management a Core Service

Offering these services leads to expanded wallet share, higher revenues, and increased member loyalty.

November 1, 2019

Credit union leaders are always in search of new ways to better serve members and add value to their lives.

While your organization doesn’t chase shareholder returns in the same way other  financial institutions might, finding new opportunities to meet member needs and generate new business is still important. And when those two goals intersect, opportunity awaits.

Wealth management is such an intersection. After all, financial security is the top priority for credit union members of all ages.

At the same time, 52% of members prefer accessing financial services at a credit union, but member penetration for investment services is a mere 3%, according to a February 2019 report, “Making Wealth Management Core in Credit Unions” by Kehrer Bielan and sponsored by CUNA Brokerage Services Inc. (CBSI).

The report found that when credit unions make wealth management core to their business, they can:

  • Increase the share of members helped by the wealth management unit by 29%.
  • Double the revenue production of the wealth management unit.
  • Increase the net profit contribution of the wealth management unit to the credit union by 56%.

But what does it mean to make investment services “core” to the business? The report found that wealth management becomes a key part of the credit union’s offerings when members think of the credit union as a provider of investments as readily as they view it as a provider of traditional deposit and loan services.

The report also found that integrating wealth management services, such as retirement planning, investment services, and overall financial planning, yields several significant benefits.

Here are four advantages the report identified that credit unions may enjoy when wealth management services become core.

1. Expanded wallet share

Households that have investment holdings with their credit union keep 42% more savings and investments at their credit union than those who simply consider the credit union to be their primary depository, according to the Kehrer Bielan report. The typical credit union household keeps just 17% of their savings and investments with their credit union.

However, the report found that when just one investment relationship is added, credit unions increase wallet share by 159% and the relationship has a positive impact on member loyalty and retention.

2. Increased customer life cycle

When credit unions offer more products and services, they not only give members more options, but they also strengthen member relationships.

By adding just one investment relationship, credit unions can increase wallet share by almost 160%. And when a household considers the credit union its primary financial institution, assets held by the credit union jump by 82% on average.

In addition, the report found that wealth management client households stay with their credit unions for 1.7 more years on average versus households that view credit unions as being their primary depository.

3. Added points of sale

Members with investment relationships at their credit unions are often in need of other financial services, too. Those with investment relationships are:

  • 35% more likely to have a first mortgage.
  • 100% more likely to have a second mortgage.
  • 50% more likely to have a home equity line of credit.
  • 93% more likely to have an automobile loan.
  • 77% more likely to have a money market account.

4. Higher levels of member trust

While the report found that 44% of credit union households with one credit or depository account have a great deal of trust in their credit union, that number drops to 41% when a second deposit or loan product is added.

However, when an investment or insurance account is added, members are 20% more likely to have a great deal of trust in credit unions.

Four essential components

Credit unions have numerous ways to integrate investment services into their core services. The Kehrer Bielan report identified four essential components:

  1. Hire and empower high-quality advisor talent. Research points to a direct correlation between number of advisors and the number of members helped by wealth management services.
  2. Offer incentives for advisory business. Firms that do so enjoy a 2.4 times greater  share of their revenue from advisory business compared to firms that do not.
  3. Include and emphasize financial planning services. These services help address key member concerns regarding their financial stability and preparing for the future.
  4. Improve member awareness and referral practices. As your members have a pleasant experience with their advisors, they’re more likely to spread the word. Develop  a referral policy that recognizes and rewards members for their loyalty.

They feel appreciated and you get new business—it’s a win for everyone.

Want to learn more about making investment services core to your credit union? View our infographic and listicle here.

ROB COMFORT is president of CUNA Mutual Group’s broker dealer, CUNA Brokerage Services Inc. (CBSI). In this role, Rob leads 430 advisors at 285 credit unions managing $25 billion in client assets.

About CUNA Brokerage Services Inc.: CUNA Brokerage Services, Inc. (CBSI) provides broker dealer and registered investment advisory services to credit unions throughout the nation, offering a full range of investment and insurance products to help credit unions help their members reach a more secure financial position. CBSI, an affiliate of CUNA Mutual Group, is the leading broker dealer serving the credit union marketplace. CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates. Life, accident, health and annuity insurance products are issued by CMFG Life Insurance Company and MEMBERS Life Insurance Company. Corporate headquarters are located in Madison, Wis.

Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CBSI is a registered broker/dealer in all fifty states of the United States of America. The representative may also be financial institution employee that accepts deposits on behalf of the financial institution.