Three veterans of the industry have formed a new credit union service organization that will offer non-commissioned, fee-based financial planning and investment advisory services to credit union members.
The company, known as CuVantis Wealth Planning, LLC, will be based in Carlsbad, Calif., and will be a Registered Investment Advisor. It has been in the works since October 2018.
Keith Weber, who formerly served as chief marketing officer for CUSO Financial Services, will be CEO of CuVantis. Bob Millington, who served as chief information officer at CUSO Financial Services, will be chief operations officer. Dodd McGough, a compliance consultant and co-founder of Strategy Basecamp, will be the new company’s executive vice president of compliance.
According to Weber, CuVantis aims to stand out from the competition by focusing on what is most beneficial for the credit union and the member’s “financial journey” rather than on advisors’ commissions.
One of the CUSO’s “substantial” differentiators, Weber explained, is the company’s advisors are salary-based, not commission-based, which he said creates an “entirely different experience” for the members.
“The salary-based advisor is much more consultative than the commission-based advisor,” he asserted. Because CuVantis is fee-based, he added, that creates a more consistent revenue model for the CUSO and the credit unions it serves.
Weber said it’s not unusual in a typical commission-based program for 50 percent to 60 percent in total top-line revenue to go out as commission expense. In the CuVantis model, he said there will be an upfront compensation cost for salary, but over time, as the program matures and gathers more assets under management, it will come down to 30 percent to 35 percent, and perhaps even lower.
“That really changes the financial model for the credit union,” Weber declared. “This model has been used successfully outside of credit unions for 25-30 years. It is not a new model, but it is new to the credit union industry. We believe this model has the potential to be better for the credit union in the long haul.”
The CUSO’s offerings are tiered across six different levels, from services for members who are new to investing all the way to those who need advanced financial planning.
“There are a lot of members who have not done a great job of saving – and not always just younger members,” Weber noted. “We want to help those members understand what they need to get going.”
At the opposite end of that spectrum is advanced financial planning, with hourly fee-based services for those with complex needs. Weber said approximately 90 percent of credit union members simply will be looking for how much to save for retirement, but the top tier is designed for that other 10 percent who might own a business or a farm and need more specialized advice.
The goal, he emphasized, is to offer a wide spectrum of products that can meet the needs of investors at every level.
“What happens now is there are financial advisors who are very successful and don’t want to meet with small investors,” Weber said. “They pick an arbitrary dollar limit and say they won’t work with someone unless they have $50,000 or $100,000 to invest. On the other end of the spectrum are the less successful advisors who will meet with anyone so they can sell a commissioned product to help the advisor meet his/her sales goal. This leads to an inability to serve all members. Either the lower end is not getting served, or the higher end is not getting the quality it should. Our model allows advisors to serve all of those members through our programs.”
Rethinking the model
Weber said CuVantis is actively engaged in a number of conversations with credit unions, but the company is not ready to announce signings yet. The CUSO has also partnered with TD Ameritrade, which will be custodian of all of its accounts.
Millington said the new financial model CuVantis is introducing has the potential to make investment services programs more profitable to credit unions.
“The benefits of recurring revenue that are the mainstay of advisory relationships are pretty well-known and accepted,” said Millington. “But much of that top line revenue immediately goes out as compensation expense. Changing the compensation model creates a better member experience and an improved long-term financial model for the credit union.”
