Financial advice is a winning strategy for credit unions

Your members need financial advice. They really do.

Some could use help with retirement planning and investing, while others need advice on day-to-day issues such as improving credit, reducing debt, improving cash flow or buying a home.

The National Credit Union Foundation recently partnered with the Financial Health Network to research the financial health of credit union members. They found that 75 percent of credit union members are unsatisfied with their current financial situation. And 43 percent of credit union members ran out of money before the end of the month at least once last year.

Financial Health Network also discovered that 58 percent of credit union members are struggling financially.

This is an opportunity for credit unions.

Members Trust You

Your members don’t know who to trust. People are wary – and with good reason. Most of the financial relief stuff they see on TV is sketchy at best. Predatory at worst. There are a lot of scams out there.

But they trust you.

If members don’t get advice from their credit union, then who? Another financial institution? Uncle Fred or Aunt Betty? Or, worse yet, a credit repair or debt settlement company? If you don’t provide advice for your members, they’ll get it somewhere else.

Savvy credit unions will leverage financial advice to gain a competitive advantage, improve member satisfaction and increase wallet share.

Customer advocacy is how you build trust – and how you make relationships last. A recent Forrester article says customer advocacy is “the only sustainable competitive advantage left.” They go on to say that leading financial services firms will keep things simple, act benevolently, and build trust by continually helping people improve their financial well-being.

Powerful Possibilities

Millennials have a spending power estimated at $3.39 trillion, and Gen-Z at $143 billion. What credit union wouldn’t love to attract younger members?

Well, this attractive market cohort also has some issues with personal finances. Millennials and Gen-Zers are saddled with more than $1.5 trillion of student loan debt, with nearly 11 percent of that debt over 90 days past due. Only 43 percent of millennials are homeowners. The average net worth of a millennial is far less than Gen X was at the same age.

A recent Inc. Magazine survey found that 89 percent of millennials who don’t currently own a home would like to buy one, but only 4 percent thought they could afford to do so in the next year. Wow!

Can your credit union find a way to deliver financial advice to these people and help them pay down debt, buy a home and build wealth?

Banks Going Digital

OK, I’ll admit that delivering personalized financial advice isn’t simple. If it was easy, everyone would be doing it. But technology is making it easier.

Banks are taking a long, hard look at technology to deliver financial guidance. They’re discovering that personal advice isn’t limited to traditional 1-on-1 conversations. And they’re using artificial intelligence (AI) to gain an edge.

According to a recent J.D. Power study, banks are seeing strong gains in adoption and satisfaction with guidance delivered via digital channels. The study found that customers who receive advice via their bank’s interactive digital tools indicate the advice is highly personalized and meets their needs. These customers are also more likely to interact with their bank to pay down debt, manage budgeting and spending, manage investments and prepare for retirement.

J.D. Power says that, within the next year, digital will surpass the branch as the most commonly used retail banking customer advice channel. “Great financial advice is a key differentiator for retail banks at a critical moment in time when, according to our research, 41 percent of U.S. bank customers feel unsatisfied with their current financial condition.”

Accenture estimates potential for a 5 percent revenue increase for banks developing trusted advisory relationships. “When banks get it right, it increases their share of wallet, and grows the size of the wallet over time.”

Credit Union Advantage

Megabanks may win on scale and footprint, but credit unions have an advantage. Credit unions are more relatable, and better at making emotional connections with the communities you serve.

According to Forbes, companies that provide an emotional connection with customers outperform the sales growth of their competitors by 85 percent.

Emotional connection is particularly relevant in the midst of a pandemic that has thrust millions of people into economic uncertainty. More than 22 million people paused their student loan payments, nearly 5 million took advantage of mortgage forbearance to pause payments, and millions of people deferred their credit card payments.

As these debt relief programs end, more members than ever need help navigating their financial situation.

Advice as a Winning Strategy

As mentioned earlier, there are valid reasons why it’s difficult to provide personalized financial guidance at scale – namely complexity, compliance, and cost.

But don’t let the hurdles discourage you. Look at the situation as a competitive opportunity. Explore partnerships and technology to find cost-effective, compelling options for delivering financial advice to your members.

Helping people succeed in the years ahead is how financial institutions will win.

Rick Bialobrzeski

Rick Bialobrzeski

Rick is Executive Vice President at GreenPath Financial Wellness, where he has worked since 1996. More than 500 credit unions are partners in GreenPath’s effort to “remix the American ... Web: Details