CFO Focus: Understanding investment program profitability

Get the most from your wealth management program, both for members and for your credit union.

The numbers tell the story. In addition to helping members prepare for the future, investment programs can help credit unions increase non-interest income and build relationships and loyalty. Customers using investment services tend to have deeper, more meaningful relationships with credit unions. According to Kehrer Bielan, average checking account balances are 1.4 times higher for customers who also purchased an investment with credit unions, and savings accounts are 2.4 times higher. These customers are also more likely to use other services—credit cards, mortgages, home equity lines, and vehicle loans. According to the Federal Reserve Board’s Consumer Finance Study 2013, for every dollar a bank or credit union client has on deposit with the institution, they have $4 to $5 invested in retirement accounts, stocks, or mutual funds.

However, to be successful, a credit union investment program requires a concerted and coordinated effort by the institution and its broker-dealer. If a program is not growing, it stands to reason that it is not meeting the needs of the credit union, its employees or its membership. If the program were meeting needs, it would be better-utilized.

Understanding investment program profitability starts with a thorough analysis of revenue (product mix, AUM, return on assets) and expenses. In assessing top line gross dealer concessions (commissions) and costs in relation to industry benchmarks for revenue as a percentage of expenses, credit unions can help to ensure best practices and program profitability.


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