The CUSO Evolution Continues…

Not content to hurry up and wait while the Securities and Exchange Commission delays releasing final guidelines for investment CUSOs, some CUSO officials are looking beyond that and facing up to other strategic issues that remain unresolved.

 
 

Not content to "hurry up and wait" while the Securities and Exchange Commission delays releasing final guidelines for investment CUSOs, some CUSO officials are looking beyond that and facing up to other strategic issues that remain unresolved.

During a Callahan and Associates Webinar broadcast on October 9, Randy Karnes, CEO of CU*Answers, Kentwood, Michigan and Nader Moghaddam, president of Kinecta Financial & Insurance Services, Manhattan Beach, California, and Leonard Gzesh, Kinecta's chief operating officer discussed using a CUSO for Information Technology solutions and creating a benchmarking program for investment and insurance CUSOs.

Using an IT CUSO for a credit union's data processing solution is a good fit because the CUSO "aligns with the CU's needs, understands the marketplace, the members and the philosophy," said Karnes. "The closest thing you can do to having an on-staff IT department is to run your DP through a CUSO."

Historically, CUs have been struggling to find the IT business model that will give them what they need, he said. "It's frustrating for them. How often have they heard, 'This software will save you?' Well, they heard that about the software before that, and the one before that. The real challenge is to educate everyone about the software, to teach it, to use and make the most of it, and it has to be built in. Why is there no call center for the IT department? Ask this question: does it come with a help desk? The challenge is to teach DP to non-techies."

Karnes knows better than most people that software is only as good as the people who drive it, and learning to drive takes time and some study. Once you learn you can go virtually anywhere, and it's the same with software. And Karnes asserts that there is a strategic advantage to using the cooperative structure of CUs and CUSOs to target and meet CU DP goals: it can mean being first to market with the latest technological capability, and that can bring improved member service.

Nader Moghaddam and Lenny Gzesh presented a starting point for the creation of a benchmarking program for investment and insurance CUSOs. "We started looking at this from inside and realized the difficulty with trying to have standard benchmarks because CUSOs are so diverse. We have investments, P&C insurance, mortgages and so on," he said.

Kinecta CU president Tom Graham evinced a "special passion" for developing this, Moghaddam added, so they pressed on and created a segmented approach with various data elements for the CU, the investment side and the P&C business. "We put our ratios on the table as a beginning, in the hopes that, once started, other CUSOs would get involved."

"What we tried to come up with was a level playing field, CUSO to CUSO, so that it doesn't matter what asset size the credit unions is," explained Gzesh. "Our parent credit union is a $3 billion institution, so how can you compare that with a CUSO of a $300 million credit union? The only way to do that, we felt, was through averaging."

"I know the need is out there to have a true comparative benchmarking program for CUSOs, and we wanted to move past the informal means of doing so," Moghaddam said.

 

 

 

Oct. 27, 2003


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