BECU Trust Company, the trust services delivery channel of Boeing Employees Credit Union, the Tukwilla, Washington financial powerhouse is scheduled to debut in the fourth quarter of 2003, said President Bonnie A. Pladson, JD. The trust company chartered by the Washington State Department of Financial Institutions (DFI) will be a subsidiary of BECU Financial Services, Inc., BECU’s financial services CUSO, said Helen Hitchcock, president of BECUFS.
A November 2001 survey sent to the top 3% of credit union depositors– some with over a $1 million balance–netted a 41% affirmative response for the desirability of trust services, said Hitchcock. The survey was sent to 4,200 members, with 1,500 (34%) saying they “very much” wanted to strengthen their CU relationship, manage their money and conduct estate planning in the trust environment. “This was a very extensive, four-page survey,” said Hitchcock, “and it gave us an excellent picture of the unmet demand for these services. One interesting thing we learned is that 24% said they already had some trust arrangement.”
The trust environment is a “perfect fit” for the CU marketplace, said Hitchcock. “Banks are just not interested in small clients or face-to-face meetings with people who need to discuss such highly personal plans as how their estates will be handled, but it is what credit unions are all about. It’s a real underserved niche.” Credit unions, because they operate on a not-for-profit basis, do not have to answer to the pressures of Wall Street expectations, she said. But trust services delivery is a highly profitable endeavor that mixes money management with carefully planned family legacies, so it’s a perfect extension for credit unions.
“I will report to my own board of directors,” said Pladson, “which will be a formation board at first, and will become permanent shortly thereafter. It will be drawn from CU management, with Helen (Hitchcock) as chair.” Trust experience is a skill requirement for trust services boards, Pladson said, as the field is “highly regulated” and has very high capital standards (in Washington, the capital standard is near the $3 million mark). Cynthia MacKenzie, a sales and marketing manager with trust experience will also be on the formation board.
Survey respondents and Boeing retirees, with their 401 (k) to IRA rollovers will be the initial client base, and will grow from there, said Hitchcock. “Bonnie Pladson has extensive trust experience and the sales culture knowledge to be able to make this work. There are big start-up costs because qualified portfolio managers are highly paid. And the state must see the resumes and check the credentials of all trust company employees.”
“In the CU movement it was always, ‘if you build it they will come,’” said Pladson. “But my board is very sales and profit oriented. I have no reticence to asking for the sale and we’ll do a lot of direct marketing. I need to build the bottom line because trust companies usually do not become profitable for five years. That’s the industry standard. That’s hard for a board to understand. The average client may be with you for 11 years. It’s a relationship that builds over time. The client feels a little like they are giving up all their power because the trust has total discretion.”
Building on knowledge accumulated over time through extensive interviewing and interaction, such “personal banking” relationships engender loyalty that spans several generations in families, said Pladson, who retains trust clients from other companies. “We take all their assets and manage them according to their objectives. We look at risk, age, needs and what they want to do. People share with us things they may not tell even other members of their family. It’s a very one-on-one relationship. We become like family, it’s so deep and so binding.” Pladson said. “Our charge may be to grow the estate, provide for gifts for children, or do 529 educational trusts for grandchildren. We may look at a living trust versus a will. We take each small step in an overall estate plan based on the ‘what if I die tomorrow?’ scenario. It has to be the right fit.”
Hitchcock and Pladson also believe that the “small team approach” is a compliment to the personal banking relationship. “We’ll involve the portfolio manager in the planning stages,” (where appropriate) for the purposes of having back-up.” Plans also call for a senior administrator and an operations manager to fill out the team. “I know I’m not going to live forever,” acknowledged Pladson, “and there has to be some continuity built in.”