Consultants, CUSO’s and CFO’s

CFO's, recently attended the CFO Council Meeting in Seattle and the CFO Forum, an extension of the Wescorp’s Economic Forum in Pasedena. In all there were over 300 CFO’s at both meetings

 
 

CFO's, recently attended the CFO Council Meeting in Seattle and the CFO Forum, an extension of the Wescorp’s Economic Forum in Pasedena. In all there were over 300 CFO’s at both meetings.

The topic with the most session time at both conferences was interest rate risk (IRR) management, net economic value (NEV) calculations and responding to NCUA’s increased examination efforts in these areas. The bottom line is that economic modeling will become a more important activity, not because there has been a dramatic increase in risk, but because NCUA is looking for more documentation.

Twice yearly I meet with a group of consultants to share views and issues on our work with credit unions. The number one topic at our Madison meeting was the role of CUSO’s and how important they could be to the future of credit unions. The following are some points of view made by members of the group about CUSO and other topics:

  • Managers are conservative in their business planning because there is no reward for going outside their comfort zone. Members don’t have an equity reward either if the credit union does really well;
  • CUSO’s are raising issues never before seen by credit unions. These include equity interests for management, new kinds of risks and getting into new businesses. It may be easier to first merge CUSO’s than it is to merge credit unions because the CUSO can reward such initiatives easier;
  • The CUSO offers credit unions a choice of either getting into a business or buying something from a vendor. The CUSO can put a credit union in a different business environment, i.e. “Be in the market, not a customer of it”;
  • The rush to embrace Internet solutions was a rush to try new business models—many did not work;
  • The credit union’s sponsor relationship is valuable: E-trade just bought the “rights” to be the financial service provider to Oracle’s employee base;
  • Retain mortgage-servicing rights? Don’t do it unless you have an explicit program to develop the relationships further. Servicing is selling for almost 7 times the annual fee, which is quite high by historical measures;
  • The lead product for a West Coast credit union is free ATM’s anywhere in the world. Just e-mail the charge and the credit union will rebate it;
  • In the credit union business model, the basic cost structure-built for transaction processing- and the profit (revenue) drivers are not linked;
  • The value of e-statements is that they set up an email marketing opportunity. Easiest way to start this program.
 

 

 

June 11, 2001


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