MADISON, Wis.-Investment and insurance brokerages have two significant advantages over other income streams for credit unions, according to Hendrix Niemann.
Niemann, managing director of practice and wealth management services for CUNA Mutual Group's CUNA Brokerage Services, told Credit Union Journal non-interest income is "much more member friendly" when it comes from brokerages than fees such as overdraft.
"Revenue from investments and insurance does not require capital risk, as do loans," he noted. "Credit unions that have effective investment management programs have the highest share of wallet for both loans and shares."
Another consideration: CUs that offer investments to their members realize higher revenue per household than credit unions that do not. Niemann pointed to a study by Raddon, Strategic Business Insights and Filene Research Institute that found CUs with investment management programs make $177 in additional net income, as opposed to a negative $165 per household when dollars are invested in CDs.
"Converting CDs to an investment management program improves the loan-to-deposit ratio," he explained.
For CUs considering the investment/insurance brokerage path, Niemann said they must make it a core offering, not something that "sits in the corner unpromoted." Also, they must have the "right" partner.
"The partner has to work well with the credit union's culture," he advised. "A partner that is totally sales-oriented might be a conflict with many credit unions. The staff needs to feel the financial advisor is part of the credit union's family, and the staff must supply information to the brokers.
"If a credit union is going to have a program and does not plan to market it, do not even bother," he added.
