The average credit union CEO understands his or her own product line. But what about that of competitors?
"Whether it's Exchange Traded Funds, Index Annuities, Lifestyle Mutual Funds or Living Benefits in Variable Annuities, each have advantages and disadvantages," Mark Warshauer, Financial Services Solutions Development Leader for CUNA Mutual Group, told the company's Annual Discovery Conference.
Warshauer told the group of mostly credit union executives about the importance of having a basic knowledge of the myriad of new investment vehicles available to their members whether through the credit union, or a competitor. "There is confusion in the consumer public and a lack of understanding even by some financial advisors. Your members are reading about these investments in the Wall Street Journal and elsewhere. As a leader of your credit union, it's important to understand the upsides and downsides to many of these new investments," Warshauer said.Why the "explosion" of investment options? Warshauer boiled it down to four basic reasons:
* Technological capabilities: "We can do many more things now from a technical analysis and quantitative standpoint that were impossible to do five or 10 years ago."
* Investor emotion: "The swing from greed to fear has been more dramatic in the last five years than it has been since the 1930s. The emotions consumers felt during the run-up and into the bust have led people to protect themselves from that risk, and some new investments have been designed to address that."
* Money in Motion: "There is a great deal of liquidity in the marketplace today. Many would-be investors are still fearful of jumping into the market. It's somewhat related to the emotion, and investment advisors are trying to unlock that emotion. The first Boomers will begin to turn 60 in January."
* Demographics: "Many companies are positioning themselves to address the generational wealth transfer that will occur in the next 10-20 years."
Warshauer said credit unions need to think beyond Baby Boomers when providing investment options. "There is a significant population behind the Boomers. Gen X and Gen Y are also going to need financial services, and the size of those two generations is equal to the size of the 'Boomers.' "
He discussed many "hot, new investment products" available to members, including Lifestyle Funds. "It's a broadly diversified mutual fund 'of other mutual funds,' where professionals manage the allocation of underlying mutual funds. It's one example of an investment designed to reduce volatility, which some consumers find attractive."
Warshauer suggested his audience talk to the investment services representative in their credit unions to determine what products are being sold to members. "You need to ask if they are offering the best options available to your members. If you don't, someone else will."
