Sep 252013
Financial Advisory: A Missed Opportunity By Credit Unions

Financial Advisory Is A Large Opportunity For Engagement and Revenue Creation, Yet It Continues To Be Ignored by Most Credit Unions, Credit Union Advisors Top Rivals in Productivity, Bank Investment Consultant Financial Advisory is one of the primary drivers for Credit Unions (and Banks) to really engage their members (customers) in a way that drives Loyalty, Revenues and Profitability.  Yet, this continues to be a missed opportunity for Credit Unions (and Banks). Bank Investment Consultant recently published the results of a survey with hundreds of Credit Unions conducted by Kehrer Saltzman & Associates.  The findings – presented in the above infographic – reinforce the view that Credit Unions can be much more effective and engaging with their membership. Financial Advisory Revenue Generation The survey found that Financial Advisors generate significant revenues for Credit Unions, averaging $262,000 per 3rd party B/D Advisor, though in-house B/D Bank Advisors generate more than $400,000 in Revenue.  Either way, it is clear that Financial Advisory services generate significant revenue. Share Deposits Per Financial Advisor Credit Unions deploy one (1) Financial Advisor per nearly $450 million in share drafts, as compared to just a bit over $300 million in deposits for Banks.  Clearly, this suggests that, Credit Unions [Read More…]

Sep 232013
Customer Engagement - What? Why? How?

Ron Shevlin recently wrote an interesting article on his blog entitled What Engagement Banking Needs Is REAL Engagement.  Ron’s blog post is a reaction and comment to Jeanine Skowronski’s article in American Banker titled What Engagement Banking Needs Is Less Engagement.  Both articles are well written and, more importantly, offer keen insights on the challenges facing bankers as it relates to customer engagement.  The emerging questions include: What is customer engagement? Why Should Banks and Credit Unions care? How are Banks and Credit Unions performing? How to do customer engagement effectively? What Is Customer Engagement? Real Customer Engagement is only relevant and valued when a) customers want it, AND b) the interaction solves customers’ problem(s). Preferably, the solution offered through the Engagement is proactive with a positive customer experience. To Ron’s point, cashing a check or taking a deposit is not engagement. Nor is a ‘Like’ on your Facebook account because your customer liked the silly cat photo, or a heartwarming story about one the Bank’s or Credit Union’s staff. Engagement can, however, include helping customers with a home purchase, assisting during the selection of insurance product, supporting wealth management activities including investments, trust creation / management, among many other activities. Why Banks and [Read More…]

Sep 162013
Lessons Learned Over 12 Years in the Trenches of Early Financial Literacy – Kill the Messenger

Sam X Renick has spent over twelve years in the field of early financial literacy, reading out loud, singing off key, dancing off beat, teaching great money habits to more than a quarter of million children in nearly 40 states and 8 countries. During that time Sam has ”discovered things” and learned a variety of lessons. For example, authenticity matters more than rhythm. Fist bumps make more sense than handshakes. And children’s minds are like sponges, they have an astonishing ability to absorb information. In his series, Sam will share some of the most important discoveries and lessons he’s learned in the field and practice of early financial education. He hopes these discoveries and lessons help others avoid errors and be more effective. And mostly, he hopes, the discoveries and lessons help kids and families.  Sam’s writing for Sammy’s Song Club can be accessed via his blog.   (Guest Post) Lessons Learned Over 12 Years in the Trenches of Early Financial Literacy – Part 2: Kill the Messenger “…the messenger matters…” Simran Sethi, Professor, Journalist When is the last time you described your CFP, CPA, economics or personal finance professor as a “sick, trendy, individual blowing up my wallet?” For those interested in effective financial education, it is crucial to ask ourselves, will the audience relate to and connect with the person or medium communicating the message? [Read More…]

Sep 162013
Are Checking Accounts a Viable Acquisition, Retention or Growth Strategy?

The topic of Business Strategy and implications to Customer (Member) Loyalty, Revenue Growth and Profitability are rather timely as Banks and Credit Unions prepare for the Annual Strategic sessions.   Specifically related to checking accounts, every Bank and Credit Union ought to be asking questions including: How effective and efficient has the customer acquisition program led by checking account product sales been? How effective is the cross-sale plan that is based on WOWing the checking account customer into additional product sales?  How much products have been upsold, on average, to a checking account led acquisition?  How much revenue and profit have the checking account led acquisition customers generated for the Bank or Credit Union? Perhaps the experience of your Bank or Credit Union is an outlier, but the data is overwhelmingly and unequivocally negative.  That is, checking accounts are effective only at increasing the count of checking accounts (and perhaps the wallets of certain vendors who continue to sell the value of the checking account).   10 years ago, the checking account may have been the gateway to a broader wallet-share, revenue and profit growth, but circumstances have changed and the checking account is a liability – in all senses of the [Read More…]

Sep 102013
Will Inheritance Windfall Save GenY (and Community Banks and Credit Unions)?

There is lots of talk in the Community Bank and Credit Union circles that GenY are an essential customer base. This is so, insist Bank and Credit Union executives, despite the fact that most GenY expect free services and the vast majority are unlikely to want revenue generating products offered by Banks and Credit Unions. GenY is critical, goes the argument, because of the financial windfall they stand to inherit once the older generation passes. Never mind that an average banking relationship is about 7 years (about as long as a typical marriage) and that the expected windfall (if there is one) is unlikely to occur within this time period.  We’ve written on the fool’s gold including Knowing Your Customer Is Essential for Loyalty and Profitability Gen Y Hard Hit By Recession But Youthfully Optimistic Can Gen Y propel Community Banks and Credit Unions? New data from a recent Wall Street Journal article suggests that the windfall is not likely to happen at all!  WSJ reports that nearly 50% of the population has less than $10,000 in total savings with nearly 36% of  Boomers reporting the same.  Another 14% of Boomers have less than $50,000 in savings.  In sum, 50% [Read More…]

Sep 092013
Credit Union Strategic Thinking: Contradictions And Insight

Do Credit Unions, as a group, understand Business Strategy? The findings are not encouraging based on the survey of nearly 500 Credit Unions conducted by Aite Group.  Though the focus of the survey was limited to Credit Unions’ Online- and Mobile-Channel business objectives – the findings give us much cause for concern. The survey found that 88% of Credit Unions believe that Up / Cross-Sell of Existing Members is a key business objective for online offering and 87% believe that online is a key business strategy for Acquiring New Members.  So far so good… However, just 27% of Credit Unions believe that Generating Revenue was a key online objective.  So, just to restate… nearly 90% of Credit Unions want to cross-sell and acquire new members, but less than 30% are interested in generating revenues!  In which case, why bother cross selling and trying to acquire new members? Here is another doozy.   More than 90% of Credit Unions believe that a key business objective of their online offering is to Maintain Competitive Parity, while at the same time, 85% also believe that Obtaining Competitive Differentiation is a key business objective.  Again – how can you ‘keep you with the Joneses’ and differentiate [Read More…]

Aug 292013
Cross-selling Success Depends on Your Customers’ Profile

Cross-selling, despite significant focus and investment, is ineffective at most Banks.  Based on Deloitte survey conducted in August 2012, just 54% of consumers have more than just a basic checking account at their Primary Financial Institution (PFI) or elsewhere.  Of those that own multiple banking products, only19% owned 3 or more products in addition to the checking account with their PFI compared to 49% who have 3 or more products with another Bank or Credit Union.   Bank and Credit Union executives must therefore ask themselves questions including: –       Why are consumers not purchasing banking products (in addition to the checking account)? –       Why are consumers not purchasing banking products with their PFI?   Customer Satisfaction with Banks and Credit Unions Nearly 90% of consumers are satisfied with their Bank and Credit Union. The high customer satisfaction has resulted in the average tenure of nearly 6.5 years, with 40% of the customers staying with their Bank or Credit Union for more than 10 years. Contrary to popular belief, consumer trust in Banks is neither weak nor waning and an average banking relationship lasting about as long as an average marriage in the US.   Ownership of Banking Products Excluding Checking [Read More…]

Aug 192013
Deloitte Warns Banks and Credit Unions to Change (while they still can)

Banks and Credit Unions executives continue to be challenged to improve effectiveness of product and service pricing.  Never more so is true than when it applies to Checking Accounts – the staple of a banking relationship and the stepping-stone to a deeper Banking relationship. Consumers are Satisfied with their Bank or Credit Union Although many surveys seem to indicate that the vast majority of consumers hold a negative view of Banks and Credit Unions (FIs) and their practices, the reality of consumers’ actions are very different. 88% of consumers are satisfied with their Primary Financial Institution (FI) according to Deloitte’s Retail Bank Pricing survey conducted in August 2012 with over 4,200 checking account customers.  Just 7% of consumers expressed some level of dissatisfaction.  This figure correlates well to the historical trend of 8% – 10% of consumers who switch their Primary Financial Institution annually. Consumers Disinterested in Paying for Previously Free Products & Services Not surprisingly, most consumers are very sensitive to price increases, especially for products and services that were previously offered at no charge.   Given same level of service and same products, consumer reaction to fee increases is … not positive.  After all, very few of us enjoy [Read More…]

Aug 162013
Are Annual Strategic Planning Efforts A Waste of Time?

        In advance of this year’s Annual Strategic Planning session, we urge Bank and Credit Union executives to spend a little time on post-mortem of past Strategic Planning activities. Specifically, we encourage executives to conduct a brief assessment to determine of the effectiveness of past Planing sessions based on the answers to questions including: What action items and activities resulted from the Strategic Planning sessions held last year or even better last 5 years? Looking back, which of these action items / activities were implemented? Of the implemented activities, which created value to customers (members for Credit Unions)?  How? What factors lead you to believe that customers noticed the change and that they value the change? Did the Financial Institution (Bank or Credit Union) recognize value based on Customer (Member) Acquisition: How has the customer acquisition effectiveness & efficiency improved? Retention of Existing Customers (Members): How has the retention of existing customer base changed? Wallet-Share / Cross-Sell: What is the impact in the wallet-share and/or household product cross-sell? Revenue Growth: What caused change in revenue growth? Operating Income: What is the impact of each initiative on operating income? For each, quantify the change (even if it’s on the [Read More…]

Aug 142013
Business Development Companies Gain Traction As Banks Pull Back

The following is a guest post by Bruce Klein, Director of CrossCountry Consulting’s Financial Services Practice. ———————————————- Meet Your New Middle MarketLender – His Initials are B.D.C. New regulatory rules and capital constraints have served to make lending to the small mid-market company unattractive to banks.  A small but growing group of firms known as Business Development Companies (BDCs) are stepping in to fill the void.  These companies can fund their loans by raising money from the public via IPOs or from wealthy investors via a private equity type structure.  Banks are also willing to lend to BDCs and even the Small Business Administration has a program to help them.  This article will explain how BDCs work, the way they raise capital and how they are starting to change the commercial lending landscape. Market Dynamics A set of market dynamics has come together for which BDCs provide a perfect solution.  These market dynamics are: Small company lending is becoming less attractive to banks Asset management firms continue to search for yield Traditionally private capital investment channels are looking to attract retail investors Small middle market lending is becoming less attractive to banks The evolving regulatory landscape, Basel III in particular, [Read More…]

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