The New Tools Of The Trade

Patelco’s self-directed online investment program helps members earn higher yields and achieve financial maturity.

 
 

When Patelco Credit Union ($3.98B, Pleasanton, CA) ended its relationship with a self-directed investment accounts provider in 2009, it immediately began searching for a new platform that would allow its members to buy fractional shares of individual stocks at affordable prices. The credit union already offered advice from a registered investment advisor through CUSO Financial Services as well as a way for investors to buy equities or options. But Patelco also wanted a product suited for those members without extensive investment needs.

“There’s a market for the main street investor that everyone seems to be shunning,” says Mark Hoaglin, the credit union’s vice president of investment and insurance services. “Not every member wants or needs to meet with financial advisors, some want to start small and just get started on the investment journey.”

The credit union soon discovered a dearth of businesses with this particular focus and decided direct involvement in the arena was the best strategy to help members. After all, Patelco already knew self-directed investment options resonated with members of all age groups, including Gen Y beginner investors, boomers with maxed out 401(k) plans, and families saving for education.

A HSA Opportunity

Patelco’s members have a history of depositing a significant amount of funds into fairly low-paying, interest-bearing accounts. The credit union has the largest portfolio of health savings accounts (HSAs) of any cooperative in the country. In first quarter 2009, Patelco held $47.8 million in HSAs, according to Callahan & Associates Peer-to-Peer Analytics. By first quarter 2013, that number reached $98 million.

HSA Accounts
DATA AS OF MARCH 2013
© Callahan & Associates | www.creditunions.com

HSA-63-3
Generated by Callahan & Associates' Peer-to-Peer Analytics.

Patelco wanted to provide members with a higher-yield option to help them reach their savings goals faster. In SaveDaily, a platform that sells mutual funds rather than individual equities, the credit union saw an opportunity for beginner investors and HSA account holders to learn about investment strategies and make small investments while earning a desirable return.

Patelco partnered with SaveDaily and launched its InvestDaily platform in early 2011. With InvestDaily, Patelco members can make unlimited trades on their account for a flat monthly fee of $5.95. By comparison, other programs charge anywhere from $17 to $76 per transaction.

“This site allows members a low-cost entry point into investing,” Hoaglin says. “It’s also a great deal financially for the credit union.”

Fee income at Patelco — currently at $46 per member as of first quarter 2013 — is up by roughly $12 per member from 2010 levels. And although this metric takes into consideration many factors, the ROI for InvestDaily both off and on the balance sheet is tangible.

Fee Income Per Member
DATA AS OF MARCH, 2013
© Callahan & Associates | www.creditunions.com

FIPM-63-2

Generated by Callahan & Associates' Peer-to-Peer Analytics.

Learn As You Grow

SaveDaily hosts the investment website, but because developers work side by side with the credit union’s own IT department, the external site mimics the look and feel of the Patelco homepage. Members can sign up for or sign in to the investment service through Patelco’s home banking page. And despite the notification that informs users they will be redirected to a private label site, the whole process is a seamless experience for members.

The credit union has made several small tweaks to the site during the past two years that emphasize initial and ongoing education. Patelco provides information about the InvestDaily program as well as common investment terms and strategies such as systematic investing and dollar cost averaging. And because SaveDaily has a relationship with stock analysis provider Morningstar, users can access reports on individual funds, major holdings, perspectives, and more.

“We want to put all of these resources and information at users’ fingertips until they understand the investment world,” Hoaglin says.

Patelco also hosts in-house investment workshops every month. Such in-person interactions help members become comfortable with the world of investing and in the future will invite opportunity for employees to cross-sell products and services.

“It’s about building the channels that will serve different members in the most effective way,” Hoaglin says. “A self-directed investment option is something almost every credit union should be looking at.”

In the larger investment portfolio, Patelco will take a focused look at the needs of boomers in the years ahead, including options to help them address retirement income and rollovers as well as healthcare planning and social security.

“Comprehensive financial planning is where the opportunity is,” Hoaglin says. “It’s all about becoming a trusted advisor for our members rather than a product salesperson.”

 

 

 

June 3, 2013


Comments

 
 
 
  • An excellent choice of investing options for Patelco members. This strategic innovation for its members is an great example of what Patelco has been known for as an industry credit union leader.
    Anonymous