Wealth Management: What The Buzz Really Means

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Everywhere you turn within the financial world today, you can listen to PhDs and financial consulting "experts" preach on the topic of "wealth management."

Using buzz terms like time horizon, diversification, asset allocation, portfolio immunization, strategic taxation, trust management, and risk tolerance, they promise to teach executives how to develop an investor profile and incorporate these principles into corporate management strategies.

Credit union executives are spending thousands of dollars flocking to credit union trade group-sponsored, "professional development" meetings. At these you hear professional pontificators poetically philosophize on leadership strategies, incentive design and ways to create "member-centric," long-term relationships with your member. You can also "enhance" the experience by inviting these folks into your CU, where they promise to deliver a positive and productive self-assessment experience for a price. You get reports, charts and graphs with improvement advice and strategic measurements of how well a CEO is doing their job.

Meanwhile, deep in the operational trenches, many credit unions exist in various states of chaos, such as: underpaid and frazzled employees unable to respond to members' e-mail requests; phones ringing nonstop with call centers answering the same questions over and over; unstable and patched systems that can't communicate with each other; members hearing one thing from the teller, another from the member phone representative and finding something completely different (if anything at all) on the website. Where does one begin?

First Word of Advice

My first word of advice stop and take a deep breath Before you run off to Tahiti to spend more money for that next credit union "strategic self improvement" session, consider this you are not alone. All credit unions have the same basic objectives:

* To provide valued financial products and services to members customized to specific needs; to increase their share of wallet among members; to improve member retention and utilization of services; to increase member satisfaction, and to improve productivity in member sales and service processes.

More simply put: Credit unions want to (a) acquire new members, (b) retain and grow the "right" existing members and (c) do it profitably and efficiently. That's my definition of "wealth management."

Jump-starting this process is a bit like stripping naked and looking at yourself honestly in the mirror. It's about developing good self-evaluation habits and being disciplined in implementing the changes necessary to achieve your desired result.

Likewise, MRM is best viewed as an art and not a science we won't find any two credit unions created equal AND your own credit union strategies will always be changing and unique to your credit union.

Picture achieving these objectives like this. You have to be able to honestly evaluate and successfully integrate three things: your people (members and employees); technology, and your business processes.

It sounds simple, but getting started is the hard part. Sometimes, you don't know what you don't know. So, the obvious first step is to figure out what you don't know.

Setting very specific goals and objectives becomes a key component of your change processes. This will include developing more specific financial objectives and an understanding of your cost relationships.

Consider for example that in 2001, the top 10 credit union returns (in terms of asset returns) averaged 1.91% compared with .95% for the credit union industry as a whole. It's apparent when you start to dig into the details, where this group is better able to focus than their peer group. Not surprisingly, they appear to be much better at cross-selling products and, my guess, probably more advanced in the use of relationship management information they are gathering. Another interesting observation is that this group's average salaries and benefits per full time equivalent employee is $49,187 a whopping difference from the $41,295 average of their peer group. This tells me we would also see some smart incentive plans in place if we peeked behind their curtain.

Although NCUA data is somewhat limited in being able to look specifically at Internet banking penetration, this top 10 group reports that approximately 26% of their members are Internet banking members. This is most likely higher than comparable numbers for their peer group.

Typical Challenges for CUs

Three basic challenges face a credit union when implementing any sort of new initiative especially those related to more effectively managing member relationships:

* Analyzing the data. Candidly, the amount of data you must process, filter and understand in order to best understand your member is huge. The question becomes who should have access to what information and how should they use it?

* Changing the traditional credit union mindset. From "this is free to all members" to "if it costs us more to do, then the member needs to pay for it."

* Determining how to price product and services based upon alternative delivery channel cost considerations.

In achieving MRM enlightenment, there are a number of steps you must take, including appointing a project management "czar." Your "czar" will begin by asking questions and documenting answers working with your team members. During this initial self- discovery process, your "Czar" will work with your key area team members to document the various identified tasks and specific projects.

You should keep in mind that answering these questions always leads to a ton of new questions

As a final word, the technology vendors that you use should be willing to be a key part of this evolutionary process. Require that your vendor partners become proactive in suggesting improvements and better ways for you to achieve your objectives. Ask them to come in and help you identify areas for improvement. Make sure they really understand your business and the importance of providing technology that will give you maximum "member intelligence" as a primary objective. Today, the smart credit union vendors realize that by first assisting you with achieving your objectives, they will also win.

Terry Treadwell is the director of market stratgeies for Summit Information Systems, Corvallis, Ore. This article was prepared prior to her joining Summit. Ms. Treadwell was also the co-Founder and former Managing Director for CUES Tech Port, and has significant history of strategic and business planning in the banking arena.

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