MADISON, Wis. — The beauty of a 401(k) or other retirement product is that it can be a gateway product to both young, working adults and the burgeoning boomer retiree market, as well as to capturing lucrative business services.
That's why CUNA Mutual Group is expanding its existing retirement plan product by targeting credit unions and CUSOs that have a strong business services strategy and presence.
Kevin Thompson, vice president of asset accumulation products for CUNA Mutual, told Credit Union Journal not only is the distribution of CMG's popular 401(k) product expanding, the company is involving CUs and CUSOs in the expansion.
"There are challenges for credit unions and CUSOs in growing income, so what we are doing is partnering with credit unions and their CUSOs on a business opportunity," he said. "We sell more products, and credit unions get fee income and attract more members, especially younger ones, leading to cross-sell opportunities."
The expanded 401(k) sales program already is in place at more than 60 credit unions nationwide and is targeted for credit unions that have a financial advisor serving members' retirement and investment needs, the company said. A 401(k) product is "a nice anchor product, with a lot of things working around it," said Thompson.
"The way a 401(k) works is it is an ongoing relationship," he explained. "Some products are one-and-done, and there is no further contact. With a 401(k), it starts with a business-to-business contact, then, once it is sold, there are meetings with the company's employees. You get an opportunity to sit down with employees who may or may not be members of the credit union."
Once the enrollment meeting takes place, credit unions have the opportunity for ongoing contact with plan participants through the website, quarterly statements and annual meetings. According to Thompson, when people have a 401(k), typically there is not a lot of turnover as it is a fairly significant process to change providers.
With the aging of the baby boomer generation, there is a "tremendous opportunity" in the marketplace, he continued. Thompson said there are $14 trillion in U.S. retirement assets, with more than $4 trillion in defined contribution plans, which includes 401(k) plans.
"We want to help credit unions and CUSOs be part of that industry and part of that opportunity. We bring product expertise and work with credit unions, which provide local presence and lead generation. A lot of times a credit union has business lending functions in a CUSO, and a business loan is a natural lead for retirement plans."
The credit unions CUNA Mutual targets tend to be larger, but Thompson said there is no arbitrary asset size or membership number it uses as a cut-off.
"Typically, we look for a credit union with a business services department, or at least a business services strategy, in place. We don't want to exclude anybody, but it would be a tough environment for a credit union that is not interested in business services to sell a 401(k) plan by itself. It works better as part of an arsenal of business services," said Thompson.
CUSOs often are the business services provider for a credit union, including insurance services, he continued. Therefore, CUNA Mutual looks for a commitment of resources to business services, as well as an existing sales staff, "so there are boots on the ground."
"What differentiates ours from other 401 (k) products is we provide business development support, train credit union staff on how to support this business, and we provide marketing collateral that almost makes this program turnkey," he declared. "We are building off a current successful product. We've been in the business for more than 25 years and have $5.7 billion assets under administration. A big part of a 401(k) offering is the service. Many people can bring a product, but the key is what happens after the plan is sold. Our service consistently has been top-ranked by outside organizations for years now. We don't lose many customers, as evidenced by our 97% retention rate," said Thompson.
The end goal of a 401 (k) plan is for people to retire well, with enough money to meet their needs, Thompson said. He said CUNA Mutual believes the way to accomplish this goal is to make the product easy to understand. Studies have shown that people can become overwhelmed if they are given too many investment options.
"Credit unions are in the business of serving their members, and they are working with businesses that are not experts in employee benefit plans," he said. "The executives of a small business are looking to gain more customers and make more revenue. The opportunity to be most successful with this product is a credit union with a CUSO that has a strong business services strategy and presence."
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