Callahan's 2000 Directory of Mutual Fund and Brokerage Service Providers featured a case study of Citadel Federal Credit Union. Citadel had taken the novel approach of buying an existing business to provide investment services to its members. Citadel has a community charter and the investment business it bought was already handling pension plans for three of the businesses in its field of membership. Buying an existing company gave Citadel expertise and control that a third-party relationship could not provide.
Jeff March, former president of Citadel Financial Services, now manager of the CU, related that the decision to buy an existing business to provide investment service brought both expected and unexpected results.
''Obviously, we're going after assets under management, and we've been successful at that,'' said March. Since the beginning of 1999, we went from $8 million to $26 million. Another benefit, less tangible, is that we've had some people joining the credit union as a result of hearing about us through the pension manager, but not as many of those as we thought.''
''The other side of the business is group retirement plans, which, while hitting their targets, weren't as successful as we had hoped,'' March admitted. One of the largest existing group plans inherited in the acquisition dropped out, March said.
''It wasn't anything we did, but rather the third party administrator's failure to send timely notices and other requirements.
But we learned a valuable lesson from it, and now we have a new company's plan that helps maintain the volume.''
Go for the Expertise
March said he'd offer this caveat to other credit unions contemplating the move into investments: ''I can't stress enough how important it is to know the business you're getting into. Go for the expertise.''
March also said that coordinating the mix of a sales culture and the credit union commitment to service needs some time to settle in.
''A big plus has been the better understanding of our members and their needs and requirements, and this we got through one-on-one counseling,'' March said.
Taking a total approach sometimes means counseling members to lower debt and refinance loans or start a child's college fund before funding a big stock portfolio, he said. ''It's not just a sale to us; it's about service to the member.''
''We came to understand the role of the Business Development Representative in increasing our relationships with select employee groups and finding new companies in the area to talk with.''
Recently Jeff March was named as the manager for Citadel Federal Credit Union. The New President of Citadel Financial Services (CUSO) is John Stehman.