Navy Federal's Wholly-Owned CUSO Focuses on Financial Planning

When Navy Federal decided to form a CUSO to offer investment and insurance services to members, it was a seismic indicator of the changing financial needs of members of the world’s largest credit union.

 
 

When Navy Federal decided to form a CUSO to offer investment and insurance services to members, it was a seismic indicator of the changing financial needs of members of the world’s largest credit union.

“It was a pretty major step for us” and followed nearly a year of extensive planning and feasibility studies, said Dennis Godfrey, president and CEO of the CUSO, Navy Federal Financial Group.

“We needed the ability to offer these services to members and we chose the CUSO structure only after reviewing the demand by members for services that cannot or should not be offered through the credit union.”

Now, after more than a year of operation, NFFG has more than $48 million in investment account assets-under-management. More than 10 percent of Navy’s 2.1 million members have purchased investments, life insurance and/or auto insurance products, well ahead of projections.

SERVICES THAT MEET LIFETIME FINANCIAL NEEDS NFFG,

a wholly-owned subsidiary of Navy Federal, currently offers investment services and a menu of insurance products to members. CUNA Brokerage Services, Inc. (a subsidiary of CUNA Mutual Group — CMG) is the broker/dealer. CMG also provides the accidental death and dismemberment (AD&D) and some life insurance products. GEICO, the sixth largest private passenger auto insurance company in the U.S., provides auto insurance. Navy Mutual Aid Association offers whole and term life coverage. Other providers will soon be offering long-term care and extended warranty coverage. NFFG is also exploring a number of ideas to help other credit unions, Godfrey said.

“We anticipate good demand for long term care and extended car warranty coverage,” Godfrey said. “We are trying to meet the lifetime financial needs of our members.”

SETTING PROGRAM GOALS

After deciding to form a CUSO that would parallel many of the credit union’s existing delivery systems, management developed detailed plans that included dates and targets for many aspects of the program, such as:

  • the percentage of members to whom face-to-face services would be available,
  • the percentage of members aware of NFFG services,
  • percentage that would be using NFFG services,
  • quality of products and services offered,
  • dollar value of assets under management, and overall member satisfaction.

Navy’s board gave its approval for the CUSO in September, 1999. The CUSO was staffed and the selection of initial vendors was completed by January, 2000. The initial rollout started on April 1, 2000. In just three months’ time, the contracts with CUNA Mutual, GEICO, and the call center partners were negotiated, finalized, and put into practice.

FINANCIAL PLANNING AVAILABLE TO FAR-FLUNG MEMBERS

More than a year after the rollout, and the investment of millions of dollars, NFFG has made it possible for one-third of the credit union’s far-flung members to be within 50 miles of face-to-face financial planning. Eighteen registered representatives assist NFFG in selling products at 20 locations around the country. Members can get free consultations with professional financial planners and can trade stocks, mutual funds and options online, face-to-face or by phone.

About 4,000 members have opened investment accounts with NFFG. The accounts total $48 million in assets-under-management, for an average account size of $12,000. This includes members who are doing periodic investments for as little as $50 per month. So far, 50,000 members are paying for $4.2 billion in ADD coverage, and 30,000 members have auto insurance through the partnership with GEICO, well ahead of projections, Godfrey said.

The NFFG website (www.navyffg.com) links to CUNA Brokerage for brokerage activities and has an excellent education section—available to anyone—with well-researched articles about all aspects financial planning, including college costs, retirement strategies and IRAs.

THE RETURN TO THE CREDIT UNION

The CUSO will eventually begin paying a return on the credit union’s investment, but in the meantime, Navy FCU receives rent, payment of a management fee, and other transfers from NFFG. Navy FCU also gets the benefit of cross-selling its products, including credit card accounts, certificates of deposit, IRAs, and money market savings accounts.

Marketing promotions for investment services are branch-based. A direct mail announcement is sent to members who use the branch where an investment representative is available. There are in-branch promotions, and NFFG trains the branch staff. In addition, NFFG holds free investment seminars at the branches where an investment rep is available.

Marketing for insurance products includes direct mail, but these promotions are not branch-based campaigns, as the insurance sales are handled by call centers.

For more information about NFFG, contact Dennis Godfrey, NFFG president and CEO: (703) 206-1300 or dennis_godfrey@navyfederal.org

 

 

 

Aug. 20, 2001


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