Thursday, June 26, 2008

Offering Budget Assistance to Build Loyalty

The following post was written by Aubrey Knorr, a teller at Maine State Credit Union. She has been with the credit union for a year and a half and has been a great member of the MSCU team. Enjoy!

Finances are on everyone’s mind lately.

Stock Photos

Due to the rising prices in our economy, we all are trying to re-write our budgets to cut out all of the pointless and unnecessary spending. We are re-thinking what’s really important. Unfortunately, setting a budget and actually sticking to it are not strengths that a lot of people have.

As a credit union, it’s our job to help our members to the best of our ability. Most credit unions don’t have actual financial advisors to assist members with these matters; there is a way to help our members in this area using the employees that we already have.

Many employees already know how to analyze and manipulate numbers. This talent can be utilized by placing them into a position that would enable them to sit with members and plan out budgets that the member can stick to, based on the members own income and expenses.

In a world of rising gas, food, and energy costs, on top of loans, credit cards (about 15% of people have more than $10,000 in debt!), childcare, and working long hours, our members need our help. If we can help them to consolidate and cut back with a budget that they can stick to, they will learn to trust us with any of their financial needs.

It will help us to gain more members with more accounts, and a lot of loyal people who will always come to where they are best served. Every credit union and bank has loans to offer and accounts to use, but how many have people that actually sit down with the member and go over their financial assets and needs with them?

We need to start looking at the newest needs of our members, and that is coping with the ever-changing fluctuation of the economy.

Wednesday, June 18, 2008

Mmmmmm…Financial Education: Is there anything it can’t do?

The following post was written by a friend and fellow Maine State CU employee, Dan Emery. He is a teller here at the credit union and has really stepped up in an effort to bring financial literacy to the front of our minds through research and connections.

Operating a successful business is anything but simple. It doesn’t matter what type of business you’re in, there are worries and challenges at every level. These include supply and demand, profit and loss, service standards, product standards, employees and payroll, the budget, change and improvement and the risks associated with decision-making. Before a business makes a decision it has to take into account the advantages and disadvantages of that decision. The litmus test for a decision is ultimately the bottom line; is it going to make money or will we lose money?

Credit unions deal with these same issues but we have a unique situation. Our litmus test for decisions is very simple; “Is this good for our members or is this bad for our members?”

Sometimes, to do what is best for our members we have to spend money that we may not recover in a typical sense, but it will help us gain loyal, long term members. Other times an opportunity presents itself that is beneficial to both the membership and the bottom line. This opportunity is Financial Education.

Here are a few statistics on financial literacy in our country today*:

  • 15 million adults receive phone calls from collectors or are considering filing for bankruptcy.
  • Only 2 in 10 keep track of their spending – regardless of gender, age or income
  • Only 59% of young adults in Gen Y pay their bills on time
  • The majority of Americans do not have a sufficient emergency fund (3 to 6 months of income saved)
  • More than 76 million adults say they do not have retirement savings

These stats are only the tip of the iceberg. With a little research you will uncover MANY more shocking statistics like these. So what do we do about it?

We need to help these people take control of their finances! We need to teach them how to budget, spend responsibly, save, reduce debt and build assets. This should not be a one time class; this should be a multiple step process over an extended period of time. We need to create one on one relationships with our members. We should let them ask questions and then help guide them to determine their goals, wants and needs.

How will this benefit our members? Through this process we will build a bond with our members that will make them feel respected, empowered and comfortable and we will earn their trust on an entirely different level. They will gain an understanding of their finances that will give them control, hope and less stress. It is a great feeling to have control and an understanding of your finances.

So what does the credit union get in return? Most importantly we get happy members!

We will create a reputation that people find attractive and it will show we are truly worthy of their business. If we help one person take control of their finances they will tell others how well they’re doing and how it happened; our name will get mentioned and we will attract new, long term members.

Gaining new, financially educated members will result in new accounts, new loans, more loans paid on time, fewer overdrafts and bounced checks, higher balances and more frequent use of our services by more people.

Not only should we strive to educate our entire membership we should also strive to set ourselves apart service-wise. We should do our best to lower fees, raise rates and make our members feel like they’re a significant part of their credit union and not a customer.

A thorough financial education program is a solid, long term win-win situation for both the member and the credit union.

Dan Emery

Maine State CU

Friday, June 6, 2008

The CUSO Conundrum

In my last post regarding Denis Dollar’s forecast for credit unions in 2020 the comments I got were an eye opener as to what CUSO’s are and what they do (thanks to everybody who commented and helped me further my understanding of the industry).

As I’ve thought about how CUSO’s can benefit credit unions, and more importantly, their members, I’ve had a few thoughts as to the way I feel they should be handled.

Jeffery Pilcher wrote, “My guess is that Dennis Dollar thinks CUs will pursue these ‘additional revenue streams’ wherever they can be found.” I don’t disagree with him, but my support of this is dependant on how credit unions deal with this additional revenue. Jeffery also posed the question of whether credit unions will use CUSO’s “in lieu of traditional, organic growth.”

I certainly hope not. In fact, I see a great benefit in using CUSO’s as a way to increase a credit unions ability to grow organically. By bringing in additional revenue through CUSO business, a credit union should be able to put that extra cash into serving the members. If the CUSO isn’t directly benefiting the membership, that extra revenue could (and should in my opinion) be used to offer lower rates on loans, higher returns on deposits, and research to provide them with innovative products tailored to their needs; which could turn more eyes to your credit union than a generic ad or extra branch.

There is, in my opinion, a place for CUSO’s in the credit union movement. They might even be instrumental in moving forward. More CUSO’s means more extra revenue, which means more (and less expensive) services for members. If we can keep that in mind as CUSO’s are created it could blow the doors open for a lot of credit unions. However, if that extra revenue is misused (which is completely subjective here mind you) CUSO’s could become merely a way to chase a higher profit margin.

I still think it is a stretch to believe that CUSO’s will outnumber credit unions in the coming decade. As Anthony Demangone stated in the comments, “…there are already credit unions out there with more than 10 CUSOs.” However, for every credit union that has 10 CUSOs, how many have zero, or have a stake in a single collaborative CUSO?

I feel like it still comes down to a saturation of the business landscape for credit unions. If credit union mergers continue, it is inevitable that a credit union with existing CUSO’s will merge with a credit union that has redundant existing CUSO’s. In such a situation, I assume that one of the redundant CUSO’s would be eliminated, or they would be merged. Either way you are left with one CUSO from two. Add that to the fact that, as Robbie Wright points out, “Credit unions are limited in what type of activities CUSO's can operate. In fact Jeff Russell at The Members Group can speak specifically to the pains of getting the NCUA to allow certain types of activities.”

So, in conclusion, I see a very valid reason for CUSO’s in the credit union movement. I do, however, still disagree with the suggestion that CUSO’s will outnumber credit unions themselves. Unless NCUA starts allowing some off-the-wall CUSO’s and credit unions are brave enough to go there, there are only so many ventures credit unions can get into. With mergers combining some of the existing CUSO’s, this would lead to a higher ratio of CUSO’s to CU’s, but I don’t think that ratio would ever flip. It would take many mergers and the disappearance of the niche credit union for this to happen. In my opinion, if those niche credit unions disappear, we’ve lost sight of what credit unions are all about in the first place.