Members' First Financial Services was incorporated as a CUSO in January, 1993, as a wholly-owned subsidiary of Memphis Area Teachers' Credit Union (MATCU). It has been successful, but we learned some of our lessons the hard way. Members' First provides financial services only; there is no operations division, although it is permitted by regulation and done successfully by other CUSOs.
From our five-year experience with this financial services CUSO, we offer our thoughts on how CUSOs can be used best.
We believe that first you have to ask yourselves the following kinds of questions before starting a CUSO:
- Is there a need for what is about to be done?
- If so, why can we meet the need better than others?
- What will be the CUSO's focus: operations or financial services?
- What will be the legal form: incorporation or partnership?
- Will the CUSO be wholly or jointly owned?
- Who will sit on the board of directors?
- How will management be structured? and...
- What will be the strategy?
Once these are settled, there are other growing pains: selecting the product providers; recruiting employees and sales representatives; and addressing internal political issues. There is also the issue of how to blend the programs of the credit union and CUSO, two separate cultures on paper, into one that presents an enhanced package of products and services to the intended market.
In asking ourselves the initial questions, we knew the financial services landscape is constantly changing; so, too, the needs of the people. We knew the options available to members are many and confusing. So we wanted to respond proactively.
We decided that if we did not assist our members, they would seek assistance elsewhere and jeopardize our relationship with them. We wanted to meet the outside forces of competition -- major brokerage firms, mortgage bankers, mutual fund companies and other aggressive financial service providers -- head-on in a deliberate, conscientious way to benefit our members.
A Positive Political Alignment
Most importantly, we set up Members' First to complement the overall strategy of the credit union, not to compete in any way with the credit union. To maintain a positive political alignment between the CU and CUSO, we established the Members' First board of directors with credit union management personnel, including the credit union's CEO. The board also includes industry specialists for their ideas and expertise, but they serve only in an ex-officio capacity. Day-to-day operations are handled by existing CU staff, through an insurance department created at the time of the CUSO's incorporation and headed by an officer of the credit union. To insure a consistency of purpose between the two organizations, the CUSO utilizes the services of the CPAs and lawyers familiar with the credit union's operations and procedures.
Broadening the Definition
The mission of Members' First is to enhance the credit union's traditional role with a variety of financial services and products including:
- Asset Management
- Financial and Retirement Planning
- Investment Options (stocks, bonds, mutual funds and annuities) and
- Insurance Services (life, supplemental health, auto, home and vehicle warranties)
Thus the CUSO broadens the definition of what the credit union should be in terms of a financial services provider. This in turn strengthens the synergy between the CUSO and the credit union to allow the credit union to excel. So now, in addition to offering savings, checking and loans, we present the credit union as a provider of insurance, investment and financial planning services. Credit union employees are able to refer members to Members' First rather than to outside brokerage firms or insurance agencies. Financial planning for members to fund a college education, to begin personal retirement planning or to better manage their assets is done under the same roof where they save or borrow. We strive -- whenever a member needs help -- to never say "No."
To provide these additional services we have a complete product portfolio. We work with insurance and investment companies who submit competitive proposals. We pursue experienced companies with strong compliance departments. We recruit, select and train sales representatives in the credit union culture. The CUSO staff thus become an extension of the credit union marketing department. By our presence, we let members know that the credit union has programs to meet individual needs and is prepared for on-site enrollment and one-to-one, in-office consultations.
This sales activity conforms to the CUSO's primary goal, that of supporting MATCU's marketing strategy of building relationships with members and employer groups, positioning the credit union as a full provider of financial services and meeting the needs of members at the point of sale. Income from the CUSO, though important, is secondary to the marketing strategy which, if achieved, generates a positive income flow. Relationship building is critical because our market has numerous competing financial providers. The greater the number of CU and CUSO service relationships, the better the chance to maintain the members' account relationship and to build on it.
Our experience has been that establishing a CUSO is a good move for allowing your credit union to maintain or gain market share.
Cliff Floyd is vice president of Memphis Area Teachers' Credit Union and responsible for the CUSO operation. Members' First Financial Services, Inc. was selected CUSO of the year in 1997 by the National Association of Credit Union Service Organizations.
This article was taken from a past issue of the Callahan Credit Union Report. Click here to access over 2 years of past issues organized by topic and by date.