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By CUSO Financial Services, L.P.
Investment programs move to a new broker-dealer for a variety of reasons — sometimes to enliven a dormant program, sometimes to grow revenue for the institution, or sometimes to start a new program. Rarely does a broker-dealer transition go perfectly, but it is possible to anticipate challenges to make the process as smooth as possible. A poor transition can cause lost revenue, internal chaos, and damaged client relationships. A successful transition builds team unity and client trust as well as puts the program on a fast track to revenue growth.
When evaluating broker dealers, look for these best practices to achieve the most successful transition.
Thorough due diligence of your new broker-dealer can mean the difference between a painful and a successful transition. Ensuring the aforementioned best practices are included in your transition will go a long way toward keeping your program on the path to success.
Marvin (Al) Jones is vice president of wealth management at Coastal Federal Credit Union in Raleigh, NC. With almost $2 billion in member assets, the credit union serves more than 190,000 members through 15 branches. Although the program had been successful for more than 10 years, Coastal executives wanted to move to a broker-dealer that could help take the program to new levels of success. Jones shares the credit union’s experience of transitioning a large program to a new broker dealer.
Exhaustive due diligence is the key to changing broker-dealers and that takes time.
“You can’t rush that decision,” Jones says. “We took a year and a half. We visited CFS’s headquarters, met their people, saw how they worked, and saw how they implemented policy.”
Coastal’s due diligence also included asking many questions to fully understand the process. Jones insisted on getting detailed answers on a variety of topics.
“We requested specifics from their marketing people, IT people, and HR people,” he says. “I asked how they would help us enhance the experience of our clients and how they would help us enhance revenue. Those are fundamental business questions. CFS was the only broker dealer who could give me tangible answers.”
Matching values and overall philosophies is an important part of choosing a broker-dealer. A priority for Coastal executives was that their new broker dealer be progressive.
“Things change,” Jones says. “The way this business was run just three years ago is different than the way it is today. We wanted a partner who was willing to learn, grow, and change to keep doing a good job for us.”
Once they decided on CFS and started the transition process, Jones saw firsthand many identified best practices in action.
“One of the things CFS did extremely well was lay out a comprehensive plan,” he says. “They had a whole list of activities that needed to take place to make the transition smooth. It was a game plan that included what needed to be done and by whom. That was something we didn’t find with their competitors.”
He also worked with his conversion team on weekly calls to keep the process moving. By having open and frequent communications, the joint teams were able to fix any glitches fast. Jones also appreciated the holistic approach that included staff from other departments at his financial institution. An investment program does not work in a vacuum, and by coordinating the transition with all departments at the credit union, Jones was able to build credibility throughout the process.
Jones and Coastal FCU’s management were very pleased with all of the tools CFS provided to help the investment program grow. Key credit union staff received fundamental training on the investment program’s processes and technology systems prior to going live, which was vital. But a primary factor in choosing CFS was the broker dealer’s ability to help Coastal offer more services and achieve better results.
“We wanted a better platform with non-proprietary products and unbiased support,” Jones says. “And we needed a partner who was invested in helping us and didn’t just expect us to do it on our own. CFS was able to demonstrate specific ways they would help us grow and by how much.”
For example, CFS staff reviewed Coastal’s revenue and expenses and provided a benchmark budget that Jones could use to ensure he was properly allocating program revenue. CFS business development staff provided guidelines to help him create a new position for a client relations advisor. He received a detailed breakdown on what activities that person should do, how they should be compensated, and how their efforts would support the rest of the program.
“The CFS Program Development Center is where they store resources like these, and I use the Center almost daily,” Jones says. “It gives me the day-to-day specific tools I need to improve.”
Coastal has expanded its services to members through its relationship with CFS by offering several additional services:
After the transition was over and Coastal Federal Credit Union’s investment program had been with CFS for approximately three months, CFS requested feedback on the transition process. Jones and his team outlined what they liked and didn’t like, offering suggestions on areas in which CFS could improve. Jones says he was especially impressed when CFS acted on the feedback and changed its processes. He saw that as proof his new broker dealer was dedicated to continually enhancing its support.
Even more telling is Coastal’s program success after its first year with CFS. The program has grown 121% in its first year, reaching an impressive $1,114,912 and is on pace to reach nearly $1.5 million by the end of the second year.
This sponsored content article is provided to the credit union community for shared insights and knowledge from a recognized solutions provider in the industry. Please note that the views and opinions offered here do not reflect those of Callahan & Associates, and Callahan does not endorse vendors or the solutions they offer.
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March 10, 2014
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