Time to Treat Investment Programs as Core Products

By Hendrix Niemann

Over the years, I’ve wondered why credit unions don’t make a big deal about their investment and insurance programs, since the benefits of doing so are obvious. Let me give you a few examples.

First, multiple studies confirm that a strong, healthy, and vibrant investment and insurance program pays dividends in multiple ways. According to a recent Raddon Financial Group report, credit unions lose an average of (-$165) on CDs but make an average of +$177 providing investment products to their members. This means converting CDs to investment accounts can potentially result in a substantial increase to bottom-line revenue, while simultaneously improving the capital ratio.

Second, investment and insurance products are the largest potential untapped source of member-friendly non-interest income, according to Filene Research Institute. Credit unions only attract around 3 percent of their members’ investment dollars, while almost half (46 percent) of members have investment accounts elsewhere.

Third, recent studies from Strategic Business Insights and Kehrer Saltzman & Associates confirm that members who purchase investment and insurance products from their credit union are more loyal than those who do not and are more likely to consider the credit union their primary financial institution. The importance of this “stickiness factor” cannot be overemphasized.

Despite these benefits, many investment/insurance programs are not viewed as core components of the credit unions’ mission. Why? A healthy fear of Wall Street shenanigans is part of it. Losing deposits that might be needed for future lending is another explanation. And some credit unions just don’t want to establish a sales culture they believe goes hand-in-hand with providing (“selling”) investment and insurance products.

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