Credit Union-Dedicated IBD Explains Why Growth Opportunities Are Greater than Ever for Credit Union Wealth Management
Fans of the cult classic “Highlander” movies love to quote the mantra: “There can be only one.”
In the credit union-focused independent broker-dealer space, there is only one – and new recruits are flocking to it.
In the scant few days of this new year CUSO Financial Services, also known as CFS, has already announced two partnerships with the investment arms of credit unions – Cornerstone Investment & Retirement Services, part of Cornerstone Community Federal Credit Union, with over $570 million in assets and Eglin Wealth Management, a program of Eglin Federal Credit Union, with almost $2.8 billion in assets.
A subsidiary of Atria Wealth Solutions, CFS provides retirement, wealth management, advisory and insurance solutions to over 200 credit unions and banks nationwide. CFS’ assets under management grew last year at the brisk pace of 11.3%, finishing at $40 billion.
CFS’ singular focus on and 25-year experience with credit unions distinguishes it among IBDs in the financial services industry, as does its focus on recruiting partners that share its strategic vision rather than programs meeting certain asset thresholds.
To learn the drivers behind CFS’ growth and how those relate to the challenges, opportunities and trends in the credit union wealth management space, we spent time with Valorie Seyfert, the President and Co-founder of CFS.
WSR: These days, most third-party IBDs that serve credit unions do so as part of a broader mandate to support the investment programs of financial institutions of all kinds. How are the needs and demands of credit union investment programs unique relative to the broader financial institutions space, especially banks?
Seyfert: Credit unions focus on optimizing their members’ experience, including holistic financial education, emphasizing financial planning and advice with an IBD that supports efficient, broad delivery of tools for the advisors and program.
The focus on member experience requires servicing members with varying needs ranging from low-cost, self-directed advisory solutions, low account minimums and support solutions for first time investors to high net worth services such as advanced planning, practice management and customized portfolio management.
A credit union’s charter governs who they can serve, whether a community, select employer group (SEG) or sole sponsor charter, and the IBD’s ability to understand and support customized strategies and solutions for the precise member base is critical to the success of the investment program.
WSR: What do you believe are the biggest growth opportunities and obstacles for credit union investment program managers in the next 12 to 24 months, especially given the potential for interest rate hikes from the Fed during this timeframe? How is CFS helping credit unions to maximize opportunities and mitigate risks in this current environment?
Seyfert: The largest growth opportunity for credit unions right now is serving more members by expanding their number of advisors. During 2021, we saw more people than ever retire or begin retirement planning. Whether a result of the pandemic or other factors, it’s likely that the opportunity to provide investment advice for retiring Americans will continue over the next 12 to 24 months.
Obstacles for credit unions include assuring that their members are aware that the credit union can help them with retirement needs and having sufficient experienced resources to meet those needs, as well as making resources available for the investment program amidst many other priorities.
Our top 50 credit unions saw rapid growth, with average revenue growth of 28% and 47 of the 50 having their best year ever. Those that promoted their programs’ retirement services most prominently and added advisors experienced the greatest growth, in several cases exceeding 50%.
Rising interest rates will divert attention to lending priorities and rate strategies. Coordinating those strategies with the investment program’s efforts to engage members in a broader discussion of their needs will optimize opportunity and mitigate risks in what is bound to be a dynamic and potentially volatile market environment.
WSR: It sounds like CFS is off to a strong start this year. Why does CFS believe it is well-positioned to capture more credit union investment programs this year and beyond?
Seyfert: We are off to a strong start this year with several credit union programs converting to CFS in December and a solid pipeline of prospective new credit unions looking to join us in 2022.
Prospective programs tell us they need comprehensive data solutions for advisors and programs on a single platform, more efficient tools for engaging members and an IBD small enough to understand their business yet big enough to deliver, with the financial backing to compete.
I call it the “sweet spot” of financial services and that’s exactly where CFS is today.
CFS has a 25-year history focused on credit unions, so we understand their needs and drivers of success and have the financial backing and support of our parent company, Atria Wealth Solutions, providing broader expertise, resources and scale to compete in today’s environment. Atria’s vision of wealth management perfectly pairs with CFS and the need of credit unions to meet their members’ investment and financial planning requirements.
WSR: As your recent announcements have pointed out, CFS is well on its way to be the proverbial “last man standing” when it comes to being an entirely credit union-focused third-party broker-dealer. Why haven’t you decided to diversify in terms of supporting a wider spectrum of financial institutions, and what is it about the credit union model that makes your firm so committed to supporting it?
Seyfert: Cooperatively owned by their members, credit unions are the peoples’ financial institutions. Our mission has always been to make investment and financial planning services more broadly available.
Credit unions are collaborative by nature, and CFS benefits from the input of its credit union clients to build the best offering for their members. Our ability to stay in front of the opportunities and overcome the obstacles that credit unions face depends on the involvement of advisors, program managers and executives. This collaboration has sustained innovation and solidified our position as the leading provider of credit union investment programs.
It has also positioned us to serve a broader spectrum of financial institutions. Our sister IBD, Sorrento Pacific Financial, also owned by Atria, focuses on providing investment services to banks. Sorrento and CFS have had a shared service model for many years which continues with the Atria shared service model.
Julius Buchanan, Contributing Editor at Wealth Solutions Report, can be reached at jbuchanan@wealthsolutionsreport.com
