IRAs: Opportunity for Growth in 2008 and Beyond

IRAs represent a large potential growth opportunity for credit unions. As the end of year approaches, now is the time to make members aware of their IRA options.

 
 

Credit unions currently hold 1.2% of the total IRA market. If credit unions could capture an additional 0.5% of this market, it would translate into over $21 billion in additional deposits for the industry! IRAs represent a huge potential opportunity, both in terms of share growth, and more importantly, long-term relationships with your members.

The end of the year is quickly approaching, and members will be faced with a multitude of financial planning decisions, one of which will be deciding how much to allocate toward their retirement. Now is the time to be proactive and make sure that members know about credit union IRA options. This is a great opportunity to emphasize the 'trusted advisor' role for credit unions.

The chart above demonstrates that IRA balances at credit unions have consistently grown over the last 5 years. Since June 2006, IRA balances have grown at an 8.6% annual rate. While the growth in total IRA balances is certainly positive, credit unions' share of the total IRA market is gradually slipping!

Do IRAs Have a Significant Impact?

The percentage of total shares IRAs represent has been growing over time and currently represents 8.8 % of total credit union deposits. Data suggests that a strong IRA program at a credit union can have a positive impact. Credit unions with nearly twice the average IRA balance also have a share balance that is 16% higher then the national average. It is also important to note that these IRA balances represent a long-term relationship that can be continuously built upon throughout the years. The table below shows a group of IRA leaders that have at least $2 million in IRA deposits and held 20% IRA Balances/Total Shares.

 
CU IRA Leaders
ALL CU's
% Difference
Avg. IRA Balance
$20,800
$10,919
48%
Avg. Share Balance
$8,654
$7,306
16%

Promoting your IRA program and additional investment options should be a priority for 2008. This is a growing market where credit unions have an opportunity to capture greater market share. Solidifying your role as a trusted financial advisor is especially critical in the wake of the negative subprime mortgage coverage. Credit unions have an advantage over banks when it comes to maintaining a 'trusted advisor' relationship, and now is the time to capitalize on that asset.

 

 

 

Nov. 19, 2007


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