Credit unions present a huge opportunity for financial advisors to build a client base, according to Rob Comfort, president of CUNA Brokerage Services Inc.,a wealth management firm based in Waverly, Iowa.
Only about one-sixth of the 6,000 credit unions in the U.S. offer wealth management services as an option and within that 1,000 only about 2% of the credit union members take advantage of the service, Comfort said. And yet, more than 50% of credit union members have said they would like their credit unions to provide financial planning services.
“Credit unions are the most underleveraged opportunity in the financial industry for advisors,” Comfort said in an interview. “Credit unions are the next great opportunity for advisors to offer their services, in part, because the credit union movement is growing and so few members have access to wealth management services. The members have critical needs for the services that advisors provide.”
“There are a few reasons credit unions have such low penetration rates when it comes to wealth management," he said "Historically speaking, credit unions have been most focused on the businesses they know best—the traditional balance sheet businesses of loans and deposits. They’ve also had far too few advisors, and when they do have services available, they often don’t have a refined approach to getting the word out among members. These are all strengths [found] at CUNA Mutual Group, and studies have shown that when a member has a wealth management relationship, it helps bring in more loans and deposits, too."
CUNA Brokerage Services Inc. offers broker-dealer services and investment advisory and planning services to retail investors.
Advisors who become associated with credit unions “are expanding their businesses almost faster than they can handle,” Comfort added. In addition, “more credit unions are expanding their services to include wealth management because it helps them fulfill their core missions” to provide for members’ financial needs, which go beyond savings and loans. “At the present time, many credit union members are turning to others for wealth management services or their needs are not being met.”
Offering wealth management and financial planning services helps the credit union build loyalty and aids them in increasing the market for other services they provide, which generates fees for the credit union, he added. The 1,000 that provide this service tend to be the larger credit unions.
CUNA Brokerage Services Inc., which is a subsidiary of the CUNA Mutual Group, an 85-year-old provider of financial services to credit unions and their customers, recently agree on a strategic alliance with LPL.
Credit unions have two core missions, providing a place for saving deposits and authorizing loans, “but without wealth management the credit unions cannot do legacy planning, retirement planning or provide other services,” Comfort said. “Credit unions are known for helping people of all income levels. Only about 500 advisors work with credit unions now. We want to reach a broader audience.”
“The blueprint for success for credit unions that are deciding to offer wealth management services is to have the optimal number of advisors to serve all of the members,” Comfort said. “We want to help credit unions market their wealth management services.”
There is a general perception in the advisory world that credit unions do not have the sophisticated tools that advisors want, but that is no longer true, he added.