article reprinted from the 2000 Mutual Fund Provider Directory.
Receive this publication free with the purchase of the 2000 CUSO
Directory! Click here for
fund salespeople were to vote on a theme song characterizing 1999,
the winner might very well be the Frank Sinatra ballad, "That
was a very good year."
What's more, they figure the refrain is likely to apply during 2000.
Many say it's
a case of a rising tide lifting all boats. The strong stock market
and robust economy created a pool of investors seeking options beyond
modest fixed-rate accounts. That's dandy, but salespeople stress
those investors need to realize the potential for loss when the
A Record Year
director of sales and training for the financial institutions division
of Financial Network Investment Corp., points out 1999 was a record
was up just over 30 percent," he notes. "We did $1.3 billion
sales volume. I think the reason customers are continuing to flow
to us is related to the relationship they develop as a member of
the credit union. Members really have a comfort level with talking
to somebody inside the credit union; somebody the credit union has
brought in to assist them.
also the privacy issue. I believe they feel a little bit more secure
their information isn't going to be shared and they're not going
to be marketed to by another company."
What prompted such a good year?
"It was another solid year of mutual fund returns, making people
-- rightly or wrongly -- more comfortable with mutual funds, specifically
equities. I don't know if that is necessarily a good thing. There
are a lot of people getting in and starting to have expectations
of 15 to 20 percent returns and no realization of the potential
loss. We're doing everything we can to make sure we're disclosing
the down side -- because there will be a down side," Taylor
working inside credit unions did see more movement toward equities
and not necessarily an overwhelming surge toward sexy technology
stocks. Taylor figures many people still hesitate to move into that
A large task, he indicates, not only for FNIC but also for the industry
as a whole, was integrating technology into the overall business
plan. Taylor includes within technology everything from Internet
training to back office functions.
was easily our greatest challenge in 1999 and will be, I think,
going forward the next couple years," Taylor says.
is 2000 will be another record year. January was a record month.
We'll continue to integrate ourselves with the Internet and put
more tools in the hands of our credit unions and reps so they can
better serve members."
Fulp at Raymond James Financial Services Inc. also saw business
in 1999 very much buoyed by the overall market. He comments on the
psychology he sees at work.
credit union membership is as diverse as the entire U.S. population,"
Fulp says. "You have people ranging from fairly affluent to
hardworking people doing their best to meet their obligations. Investors
are people who have discretionary capital and are looking to put
it to work.
I would say because you don't have the saver mentality as much as
you do an investor mentality at work in our economy, monies that
might in the past have gone to a savings account will more likely
go into a mutual fund or other investment vehicle."
thing that's giving rise to investing is retirement. As baby- boomers
like myself get closer and closer to retirement, you start thinking
about it. You start focusing on curtailing your outlay of income
and start trying to save more money. If you are an investor, you
are going to put that money into investments. If you actually reach
retirement age, you have these rollovers coming out of qualified
corporate retirement funds. You ask, 'What am I going to do with
Technology stocks are on the tips of the tongues of investors, Fulp
says. However, when you look at the breakdown of the mutual funds
actually sold, people buy growth and income funds.
sees a great demand for financial planning advice during the next
decade or two. The biggest challenge for the investment services
industry, he continues, is helping people understand the difference
between a do-it-yourself approach and using a professional. People
are always attracted to getting something cheap. The long period
of market growth has boosted confidence in handling one's own portfolio.
"I think it (2000) will be another good year for investors,
barring unforeseen world events. We know it is so important that
all of the professional financial advisors who represent our firm
and work with credit unions be on top of all current issues and
be continually educated. We're doubling up our time and energy to
help everybody stay on top of the market curve. We want our advisors
to guide people to the best way to make their retirement monies
last long enough so they can enjoy a full retirement without financial
worries," Fulp says.
of Mutual Funds
1999 mutual funds accounted for a large portion of business at CUSO
Financial Services. Valerie Seyfert, the president, has watched
the market continue rising in early 2000.
it last? Nobody can say. Certainly those of us who have been in
this industry for many years know what goes up must come down,"
At the same time, there's a lot of capital out there searching for
a home. She notes what members have been seeking - higher earnings.
wanted to improve returns over those they could have gotten in a
fixed income or other more conservative investment. We've had a
very long-running bull market. At this point returns on mutual fund
investments have been so good for so long it is an attraction most
people just can't ignore," Seyfert says.
are popular. However, she adds, because many people have not been
active in the market during a downturn they think -- perhaps falsely
-- mutual funds are a safe investment destined to keep going up.
suggests the biggest challenge firms face today is meeting investor
expectations for the delivery of information about their investments.
To meet that
demand, CUSO Financial Services offers an on-line web site called
e-vision. At the web site members can get complete details on an
investment they're considering, such as Morningstar reports providing
historical data on returns.
A push during 2000 will be linking credit union and brokerage capabilities
so members can instantly settle their investment transactions.
Sales at financial
institution clients of LPL Financial Services jumped 25 percent
to more than $900 million during 1999. Vice President James Norwood
echoes others in citing a growing consumer thirst for investment
He sees more
and more credit unions looking to associate with broker-dealers
furnishing full-service advice and financial planning. Credit unions
also want to allow members to look up their accounts on-line.
unions themselves as well as broker-dealers describe 1999 as an
excellent year for mutual fund sales to members.
At First Technology
Credit Union in Oregon, Kelly Corah labels last year "excellent."
She's FTCU director of CUSO services.
As for the
current year, "I'm cautiously optimistic," Corah says.
"When you come off such a wonderful year you wonder if it's
going to continue or whether investors will change their attitudes.
The perspective I have is more from full-service and financial planning.
As members become investment-savvy, will they go direct?
"While we have on-line trading programs, they're still in their
infancy. It's kind of hard to gauge how our business is going to
change. We know it's going to change. We know we are going to have
more members utilizing our services. We just don't know what that
will mean in dollars."
attract as many members as possible, FTCU offers four different
investment options from full-service advice to member-directed.
To accomplish this the credit union has partnered with several broker-dealers.
there's no way to keep up with growth without broadening the choices
available to members. Her goal during the current year is to boost
member awareness of the services available.
Credit Union in California has a mature mutual fund sales program,
in place since March, 1989. Curtis Miller, the program manager,
sees many members coming into more money.
doing a lot of rollover business for people moving around in the
workplace,' Miller explains. "We have a kind of special situation.
One of the military installations closing down, an Air Force base,
has been a source of membership. Confidence in the market has also
helped, even in the face of Y2K.
the biggest challenges in 1999 were keeping equanimity with respect
to bond returns and the rising stock market. Some people started
off with bond investments. We had bonds going down in value or just
maintaining their value. Watching the stock market go crazy, it's
hard for people to stay on course."
Even so, 34
percent of Miller's business was repeat business. SAFE CU's FNIC
representatives moved about $25 million into investments last year.
They're now managing about $150 million in mutual funds and other
investment products. Some 50 percent is outside money.
want to make mistakes and follow trends too much. We don't follow
hot tips. We worked with the tried and true approach of diversified
asset allocation. People still want to have some advice. We do all
the paperwork and the coaching," Miller says.
puts on his 2000 wish list the Federal Reserve lowering interest
rates, less market volatility than some people are predicting, and
rising bond prices. He would also like to see more down-to-earth
investor expectations. After all, anticipating 40 percent return
on average isn't realistic.
is vp, supervisor and principal of Tinker Financial Services at
Tinker Federal Credit Union, Oklahoma City. Even a brief slowdown
caused by a change in broker-dealers didn't stop 1999 from outperforming
1998, she notes.
ahead, she joins others in expecting another good year overall,
even with some ups and downs. Member education will continue to
be a major focus. The broker-dealer will release on-line trading
for pre-qualified clients. If the credit union does offer this to
members -- and that hasn't be decided yet -- TFCU will have to figure
out how to best utilize it.
to confidence inspired by the stock market and overall economy,
Peddycoart notices baby-boomers putting money into the market as
they prepare for retirement.
are looking for guidance more than specific products," she
observes. "Part of that is the responsibility of the rep to
talk to them, find out their circumstances and place them in the
right product. Much of our business is mutual funds and annuities.
I did see a little bit of a pickup in fixed annuities last year,"
members into the credit union for investments when other options
are a phone call, mouse click or short drive away?
I think it has to do with their loyalty to the credit union, plus
the convenience of one-stop shopping," Peddycoart says.