Traditional Role Of CFO Evolving Into 'Financial Steward'

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The role of the credit union CFO is expanding beyond the traditional investment portfolio management into other areas of the operation, including marketing and planning, according to two analysts.

In short, CFOs are becoming the credit union's "financial steward," said Jerry Boebel, a senior investment advisory consultant with CUNA Mutual's Financial Solutions Group. Boebel offered his insights during the CUNA CFO Council's Conference here, where he was joined by Paul Lefugey of MEMBERS Capital Advisors.

"We see an important emerging role for credit union CFOs," said Boebel, senior investment advisory consultant with CUNA Mutual's Financial

Solutions Group. "A traditional accountability has been managing the investment portfolio. We see CFOs injecting their financial expertise into lending, marketing and strategic planning. That supports the credit union's dual objectives of meeting member needs while maintaining financial strength."

During their remarks, Boebel and Lefurgey laid out a process for executing proactive balance sheet strategies.

"Deciding which loan products to focus on is no different than analyzing which securities to purchase for the portfolio," said Boebel. He added that one objective when purchasing an investment is to obtain appropriate value for the risk you're taking on it. He said the same objective should be used in identifying optimal loan growth.

"There are no bad loans, bad deposits or bad investments. There are only loans, deposits or investments that we didn't price properly," Boebel said.

"The role of financial steward to the rest of operations takes a significant time commitment from the CFO," Boebel added. "That leaves less time to focus on the traditional role of managing the investment portfolio.

But a CFO can still wear the operational hat without neglecting the portfolio management duties by leveraging the expertise and systems of any number of investment advisors."

MEMBERS Capital Advisors' touched on a number of investment-related topics and advised the finance leaders on several traditional portfolio strategies. He emphasized the importance of using a "top-down" approach, driving from the ALM risk profile of a balance sheet, all the way down to individual security selection.

"When looking at an investment, you need to measure risk in each security. That's how to determine whether it's priced right and how it reacts under various market conditions. The top-down approach is used to evaluate risks at the portfolio level. After analyzing the security and whether it is priced properly, you then must analyze how it fits with the rest of the portfolio," Lefurgey said.

Lefurgey acknowledged many of the challenges CFOs face, given narrowing spreads in the marketplace, and the difficulty in balancing operational and investment roles.

He advised credit unions "to consider outsourcing the investment management of asset classes that require specific expertise and sophisticated systems."

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