You don't often hear the words "exciting" and "research" used in the same sentence, yet Bob Hoel not only uses them with relish, he also sincerely conveys how excited he is not just about the work the Filene Research Institute has done, but about what is to come.
Bob Hoel's face and enthusiasm for his work is well known to anyone who has attended almost any credit union conference. A frequent traveler, Hoel, executive director of the Filene Research Institute, has taken to the road to raise not just Filene's profile but to share the fact-based results of the Institute's broad research with credit unions.
Those findings are not always what credit unions want to hear, yet it is that very willingness to swim against the stream that gives the Filene Research Institute its credibility.
The Filene Research Institute was created in 1989 as a means of providing independent research to credit unions by university-level researchers who are experts in their field. It was named, of course, in honor of the man considered the father to credit unions development in the U.S., Boston businessman Edward Filene, whose visage remains the Institute's logo. Hoel came to Filene in 1991. Over that time the Filene Research Institute has published more than 130 studies and worked with more than 65 universities. It has hosted colloquiums in concert with its research, and created a group of rising stars within the credit union community who have been charged with bringing the best ideas to life.
Not Always The Party Line
"We're an independent organization looking at issues affecting credit unions and consumer finance," responded Hoel when asked to describe the mission of Filene. "We do not make policy. We've had a remarkable tolerance for developing research that does not necessarily correspond with the wide industry view. Our first study was on field of membership. Some people were very vocal and did not like all these overlapping FOMs. Our research said it was inevitable and that the future world would be one of overlaps. Second, we found that it was very good for the consumer and makes for better credit unions in the process." That, he adds, "was not a welcome conclusion."
The Filene Institute's work really entered the mainstream in the middle of the fight for passage of the Credit Union Membership Access Act (HR 1151) in 1998, when it published a study examining the effect of the Supreme Court ruling against credit unions on field of membership.
"That was an incredibly useful piece," said Hoel. "The Supreme Court had ruled. We went to two very respected, independent researchers, and asked who will this affect and is it a big deal? We gave them a lot of flexibility. They came back very adamant about their findings. They said this is bad for everyone at a small company, and using the most conservative estimates, that was more than 60% of the U.S. workers who were being denied access to a credit union. Why should someone at an IBM have a right to join a credit union, but someone who works at a small company not have that right? The next stage of research showed that someone at a small company is also paid less and has fewer fringe benefits. They are harmed more. How can this be fair?"
The study's impact only grew after the researchers examined the implications of the Supreme Court decision on a state-by-state basis. "We had 16,000 requests for that study. I guess every congressional district received at least a dozen, and I was told by (congressional) staff that it was very helpful," said Hoel. "We got a lot of calls seeking comment."
But all that is an historical highlight. When asked what excites him now about the Filene Research Institute's work or what might be in the pipeline Hoel immediately answers that it's pending research on how to better reach low-income consumers and another important group, young adults. It has also recently published analysis of why even the smartest CEOs make management errors, and how they can be avoided.
'Powerful' Research
"The research on serving young adults is very powerful," Hoel observed. "Credit unions are not getting their share of the market. The average member is 47; that is not the prime borrowing years, and lending is what drives revenue. A lot of credit unions are just not attractive to young adults."
But as excited as Hoel is about the work being done, he readily acknowledges that having good research and having that research make a difference are two different things. He knows most people skim the executive summary preceding every research report, and that few then read the detailed text. That's one reason Hoel seems to log more miles than a University of Hawaii sports team. "We find we also must tell people (about the research) through the media and by speaking all over the country. Just publishing reports is not enough," he noted.
When asked if there is specific research whose value is overlooked, Hoel responds by pointing to an issue at the very core of credit unions.
"The research that people typically undervalue is the research showing how credit unions operate differently than other financial institutions," he explained. "Why does it matter? Because it contributes to the base of knowledge on how credit unions are different, so that when the question of taxation is asked we have good, strong data for a response that credit union structure does matter and that the incentives are different and that behavior shows up in the marketplace. Getting rid of credit unions means getting rid of special institutions that are helpful to millions of people, including bank customers, and we have the data to show that difference. Just saying that credit unions are like every other financial institution is not supported."
Over the years Hoel said some of Filene's research has also been misunderstood. For instance, it has examined alternative forms of capital and what that might mean for credit unions. But some people "do not understand it. They believe that if there is alternative capital you surrender your ownership structure and that providers of the capital will own a piece of the credit union and have seats on the board, and that's impossible. You can provide capital and get certain returns, and for that risk taken you have to pay me a premium over a government-insured investment. You can set it up so you don't have to compromise the heart of the credit union, and that story can be hard to get through for some reason. We argue it's a wonderful way to grow with out waiting for capital to come from retained earnings."
With all the Filene Research Institute's accomplishments, Hoel recognizes there are areas where research needs to be conducted. More work can be done in serving the under-35 market, and he sees a big need for guidance in helping "credit unions to upgrade their governance structure. Many boards have an opportunity to upgrade performance and be more strategic and effective in working with the CEO."
The topics that are to go under the microscope by Filene's researchers are chosen by the members of the Institute as well as the researchers themselves. Filene has a Research Council of 30 CEOs who assemble twice a year and they set research priorities. The Filene Administrative Board approves final research proposals (it is chaired by Tom Dorety, CEO of Suncoast Schools FCU in Florida). Filene is then charged with finding the best researcher for the task, something Hoel said it does by speaking with many sources within a field and seeking recommendations.
"That's better than sending out a million (requests for proposal)," said Hoel. "It's quite unique. Our proposals and agreements are pretty thin. We give good researchers a lot of flexibility and we tell them to call it straight. They like that."
On June 30 of this year, the Filene Institute chose not to renew an agreement it had had in place with the hometown University of Wisconsin-Madison to oversee its research that had been in place since Filene's inception in 1989.
"This was no shouting match sort of thing," explained Hoel. "It's just that we decided to go and work on more of a national basis. We have fully funded a credit union research institute at UW." Filene recently hired George Hofheimer away from the CUES to head up its research.
"The people who have expressed an interest in this are incredibly talented," Hoel said. "We have heard from people at Harvard, Cal-Berkeley, Cornell, Virginia, North Carolina. It's a good group. A National Advisory Board helps us on a national basis to do so some of what we had done at UW. We ID researchers and cutting edge topics and they help us on the research methods."
Today the Filene Research Institute has grown to 1,490 members. It has received significant financial and other support from CUNA and the state leagues, along with CUNA Mutual Group and CUES. Fiserv and PSCU-Financial Services have each donated $250,000 over a three-year period to fund the research.
"What I am pleased with is we have built a solid base to go to the next level," Hoel said. "There are some things I want to do, and some more projects and make sure we have top-quality research. I want to cluster research projects. I want to take some of the good ideas and take the next step by testing them in credit unions, and with i3 that is what is happening. I'm proud of the credit union movement for helping develop this. We have been told by the cooperative industry that this is the most productive independent research effort within co-ops."
