Handouts, Hands Up, And A Hand To A Man In A River
Orlando, Florida. Home to a fake Europe, a fake Middle East and a fake Africa, meaning no place fakes it quite like Orlando. But it was also home last week to a couple of credit union conferences at which some intriguing-and real-observations were shared about what ultimately drives a credit union's success, member behavior, the disparity between what CUs say about themselves and members deliver, and much more.
Do you delight in pointing out your cross-sales ratio to your board or other credit unions? That ratio could be meaningless (or even indicative of harm to the bottom line) if what you're selling is junk.
One of the most intriguing presentations made came from Bill Goedken, president of ProfitStar, the Omaha, Neb.-based company that works with scores of credit unions and which has a relationship with CUNA Mutual. Goedken went into some detail at CUNA Mutual's Discovery Conference seeking to get credit unions to understand what really drives profitability. Like some other companies that offer software that categorizes members according to the value they bring to the co-op, Goedken broke down members as "A," "B," "C," "D" and "E," with "A" the most profitable and "E" the least profitable.
"Who are the E members?" he asked, before answering, "They are two groups. The first is the loan losses, of course. But the one that may surprise you is the household in any income spectrum that has 14 of your products, so you've cross-sold them to death, and they consider you their PFI. The problem is that of the 14, 11 of those products were underwater before you even sold it to them. That's why I'm so adamant about the need to do product profitability first."
Perhaps it's a reflection of larger, U.S. societal trends, but Goedken added that one trend he and his company have seen, is that members at the extremes of profitability-the "As" and the "Es"-are moving further and further apart. That is, CU memberships are becoming polarized among extremely profitable and extremely unprofitable members. For more details on Goedken's presentation, see the July 11 issue of The Credit Union Journal.
CUNA Mutual held its Discovery Conference in the same hotel-The Marriott World Center-and on the same days where the Florida league has traditionally hosted its annual meeting, forcing the league to pull up stakes and move several miles away to the J.W. Marriott. Perhaps that is why the Florida league used a Big Top theme for its meeting, as in a traveling circus. Word was the FCUL was not pleased with CUNA Mutual conference placement. "The dates overlapped our conference was an accidental occurrence, and we've pledged to try to keep that accident from happening again," said FCUL CEO Guy Hood in remarks to the league's 75th annual meeting, before introducing new CUNA Mutual CEO Jeff Post.
Post, by the way, who recently relocated to Madison told the crowd that "Madison Wisconsin likes to think of itself as California. I lived in California for 11 years; believe me, there's not a lot of similarities."
Also offering up some provocative challenges to credit unions was Peter Duffy, associate director with Sandler O'Neill & Partners, New York, a regular at credit union meetings. Duffy has made something of a mission of trying to get credit unions to rethink their approaches to balance sheets, arguing that interest-rate risk lies not in rising rate environments, but in declining-rate environments, and that the real risk to credit unions can be seen in underperforming investments-duration risk. "For years we talked about credit unions as not for profit, not for charity, but for service. And it has worked. We have no profit," observed Duffy. Those comments will also be explored at more length in next week's issue.
Unrelated to that topic, but similarly interesting, when Duffy asked his audience who offered the best service in their market, more than half the folks in the room raised their hands. But when he then asked who was the dominant provider in their market with majority share in auto lending and other products, no hands were raised.
Finally, Duffy had one other comment that should get Quote of the Year consideration: "The member wants to open the door, see a branch at the end of the driveway, and trip over ATMs to get there."
Former Clinton White House Press Secretary Dee Dee Myers was the keynoter at the Florida league's annual. In addition to her serious insights about politics, she shared this story. "A man is drowning in the Potomac River 100 feet from shore. A group of Republicans runs up and throws him 50 feet of rope and says 'The rest is up to you.' A group of Democrats sees the man, runs up and throws him 200 feet of rope, and then lets go of their end." Myers later added, "President Bush hates all taxes, including syntax."
In remarks introducing Dupaco Community Credit Union, winners of CUNA Mutual's Bergengren Award, CUNA Mutual's Steve Goldberg observed, "Poets have searched for decades for words that rhyme with credit union, and the closest they have come is Bergengren."
Frank J. Diekmann is Editor of The Credit Union Journal. He can be reached at fdiekmann