SAN DIEGO -
Those groups are the future of the credit union world, Bob Hoel told attendees of the American Credit Union Mortgage Association at its annual conference here, where he shared strategies for capturing their business.
Hoel is now a Fellow in Residence at the Filene Research Institute in Madison, Wis., which has conducted meaningful data gathering and analysis of demographic groups by generation and birth years and their behavioral and attitudinal characteristics. That research and the resulting knowledge of how to market to the age groups Generation X and Generation Y is critical to the future of the CU industry, he said.
"We have a growth challenge in the credit union industry," Hoel said. "We've been growing for a long time but it's pooped out on us. Consider that 30% of CUs over $500 million grew membership less than 1%. And asset growth of 22% of CUs in that same group was less than 1%. So this problem is by no means limited to small credit unions that may have fewer products and services. It's not just the smaller credit unions that aren't growing, it's almost all of them."
Past Their Prime?
The average age of the CU member has risen to 47 from 40 in just a few years. Surprisingly, Hoel said, the age when people become the most savvy about financial matters is 53, which is well past the time when most make large investments, such as buying a home. There are strategies to appeal to that age group, he said, like short-term first mortgages of five-to 10-years duration, second home mortgage products and small (one-to eight-unit) residential rentals. And the full product menu geared toward Boomers is already in play, given that the ranks of CU management are rife with them. Now, however, CUs are seeing younger generations of people, which can be good if the credit unions are positioned to capture them.
Gen X is generally accepted to include those born between 1963-1981, he said and represent "our greatest opportunity because we have only 23% of that age group," note Hoel. They are now between ages 26-44 and they are hard to please, he observed. Gen-Y's were born after 1981, but Hoel noted that there is some wiggle room on both those age ranges. Still, both seem to have passed through similar lifecycle stages, including dependent and living with their parents; single dependent and living out of the nest; single and independent; as a couple with no kids; as a couple with kids; as a couple with older kids; a couple in an empty nest; independent single and, finally, single and not independent.
Gen Y's are the best educated and the most diverse in history, he said, with 30% being members of minority populations. "They don't believe they'll have Social Security and they are less trusting of financial institutions. They don't have job security either, and they think it's quaint when Uncle Bob talks about having retired from the company after 30 years with a full pension," Hoel said.
Interestingly, they rely on the advice of their family and friends when it comes to financial matters. "They love technology, are optimistic and confident, they work hard and they play hard, too," Hoel said. But they have also amassed a lot of college debt.
What do they want? "They want speed and convenience but they want it based on a relationship, so they prefer face-to-face contact as well. They want their transactions facilitated and they want them fast and simple," he said.
A survey of young first-time homebuyers who were CU members showed that 24% admitted to not knowing much about home financing. Many used a bank or s&l for their mortgage (37.6%), 35% used a mortgage broker and 16.9% used a government agency. "That's despite the fact that they asked about a mortgage loan at their credit union," said Hoel. Still others didn't even know their credit union made mortgage loans.
About half didn't bother to comparison shop the loan and said that the real estate agent was the most influential person about financing.
Hoel recommended strongly that CUs put a 'Young Adult' strategy into the CU's planning session and annual plan so that specific products can be created to appeal to them. Dealing with college loan debts and new car loans are easy targets, he said, but getting creative starts with a goal.
"Link the generations," Hoel said. "Grandparents want to help their grandchildren and they have money. Help them work together to accomplish goals. Because they don't want to accept total liability or too much stress either, solutions that mix a CD pledged against a home purchase, or the promise of a certain number of payments or a percentage of the loan payments is a possible answer. The gift of a down payment and the agreement to rent a portion of the house is another option.
The Big-Time Events
Hoel advised a focus on the big-time events like getting married and buying a first home because those life stages are tied to financial choices.
Once you make the loan, stay in touch by sending a thank you card and a few Blockbuster movie rental tickets if they make on time payments. "That's all part of building the relationship and this generation really likes to be treated with respect and appreciation. In my life, I've had 16 mortgages and not a single bank or CU ever said thank you to me."
Don't talk down to them, he warned, but be skillful in communication. "Humor is OK but treat important matters seriously. Be a trustworthy, information-filled source and combine E-delivery with face-to-face meetings to establish that important connection."
