best practices in benefits prefunding
Rob Rusch
Rob Rusch

bundle of cash tied up with a red bowMore than 10 years ago, National Credit Union Administration Rule 701.19 went into effect. It gave federally chartered credit unions the ability to purchase investments that would otherwise be impermissible under parts 703 and 704 of NCUA’s rules and regulations, as long as these investments directly relate to the credit unions’ obligation or future obligation to support employee benefit plans, including such things as health insurance and 401(k) plans.

Over the years, there hasn’t been much discussion about the regulatory expectations, which include board oversight and approval of a credit union’s associated investment policy used to fund the pre-funding plan. This is due in large part to the Great Recession, which occurred shortly after 701.19’s implementation. At the time, the financial crisis dampened credit unions’ interest in new types of investments.

Now, with the improving economic environment and the increasing need to retain and attract top talent, credit union interest in investments with higher yields to help improve employee benefits has grown. So has regulator interest. Examiner directives related to lack of due diligence and/or board and management oversight on pre-funding arrangements are now much more prevalent.

In the current environment, we suggest credit unions take three steps:

First, determine whether a pre-funding program is needed, based on your credit union’s specific financial situation. Being able to demonstrate to examiners that you have a need for a program is where you build the foundation of a successful safety and soundness discussion. Once you’ve determined that a program is necessary for the long-term strategic success of your credit union, create an investment policy with the board and management team involved in its oversight. Documentation of your research and analysis in developing the policy will provide further support and justification to the examiners.

The program’s investment policy should include, at a minimum, concentration limits, required due diligence, qualified obligations and exit strategies. Due diligence may include the following:

  • independent legal opinion on the policy;
  • complete asset/liability management and cost-benefit analyses;
  • research and evaluation criteria of the different investment vehicles, products and vendors;
  • assessment of how the investments could affect reputation risk.

An important next step to satisfy your examiners is to demonstrate a direct relationship between the benefit obligations and the investments. Obligations can include a credit union’s expenses for such benefits as life, health and disability insurance, as well as retirement plans and executive benefits. A way to tie the benefit obligations to the investment amount is the expense-offset method, which is a formula whereby the credit union directly compares the actual benefits expenses to the actual earnings generated through the plan’s investments on an annual basis.

Finally, you need to demonstrate a thorough understanding of the risks associated with your entire pre-funding arrangement – ranging from the program structure to the investments used to fund it – in the context of your credit union’s particular circumstance. This means understanding the due diligence process and maintaining documentation that can be provided to the examiners. This documentation will show that not only did you conduct appropriate due diligence upon plan inception, but that you are maintaining your due diligence and oversight on an ongoing basis.

Some credit unions will use a third-party vendor to educate and counsel them along the way. Be advised that working with a vendor does not exempt you from any fiduciary responsibility.

Rob Rusch is associate general counsel for CUES Supplier member and strategic provider CUNA Mutual Group, Madison, Wis. Fill out an online interest form or request a brochure to learn more about Executive Benefits Program and CUNA Mutual Retirement Solutions, in partnership with CUES.

better board orientation
Debra Beck, Ed.D.
Debra Beck, Ed.D.

Better-Board-Orientation What would be a better way of welcoming new directors that what is done now?

I spent a lot of time reflecting on this question a few years back after being interviewed by Renee McGivern for her “Nonprofit Spark” podcast. While I had prepared to share observations and recommendations about new board member orientation during the interview, McGivern’s question, “What would a ‘fly on the wall’ see when a properly structured new board member orientation is underway?” still gave me pause.

This article articulates my resulting fuller vision of what a good first meeting with new directors looks like. Let’s open by talking about three assumptions that underlie my vision.

Three Assumptions You Should Examine

First, orientation is more than that first event, scheduled after a prospect has agreed to serve on your board. In fact, orientation of your new board member began long before he or she said “yes” to running or election.

The new board member should already know some key things, because you’ve specifically outlined them in the recruitment process:

  • the mission and vision of your credit union and the basic products and services it provides in advancing them;
  • the specific expectations of your board—not only the bottom line legal and fiduciary responsibilities, but also the larger, strategic leadership roles of your governing body;
  • the specific expectations you have for him or her—why you are recruiting this member to serve now. Do you need their particular professional expertise? Are you interested in reaching out to new segments of the community via their connections to that community? They need to know, up front, what they are being asked to bring to the table beyond the general board member job description roles.

Second, new board members need to have access to the specific details needed to govern from the moment they are elected. Whether it is a hard copy board handbook, an electronic board portal used to store key board documents, or some other resource, essential documents and data (e.g., the bylaws, minutes, financial statements, and member statistics) should be readily available to them. New directors are smart, successful people. You do not need to spend an orientation session reading to them what they can review at their own convenience.

I’m not saying you have no need to review some of those details in this formal setting. I’m saying do not waste precious time reciting all those details at an introductory event.

Third, no matter how open and user-friendly you make an orientation event, new members will feel overwhelmed and they will not remember everything they need to know. You can do your part by resisting the urge to dump truckloads of details on them in one sitting, by reminding them that they’ll have access to most of these details when they need them (e.g., the handbook or portal), and by assuring them that questions—now or later—always are welcome.

Must-Haves for That First Session

So, with all of that as a foundation, what should that fly on the wall see during a first session with new directors?

New members aren’t outnumbered by “insiders” in attendance. At most, a two-hour event would include the new members, the board president, the CEO and the new member mentor(s). (More on the mentor later.) New directors already are likely to feel overwhelmed. They will have one or more terms to get to know the rest of the board and staff. This session needs to be a comfortable, safe place for exploring—with their fellow newbies—what it means to serve on your board. Confronting them with an endless parade of people, especially insiders bearing PowerPoint presentations can add to their anxiety and the potential for overload.

The session and its content focus primarily on the board and the new members’ roles within it. The basics aren’t new, because they were outlined in recruitment. This session gives new directors an extended opportunity to explore what their new role really involves: how the board accomplishes its work (e.g., the way the board is structured to fulfill its roles, the committees or other work groups that facilitate that work, the routines and events of the board’s year). It gives new directors a chance to go into greater depth about what that looks like and an opportunity to see how they will go about finding their place as active members. Additional information about the organization and its work also is inevitable, but it isn’t the primary topic for this session.

It connects the board’s collective role, and their individual role, to the heart of the organization and its work. Too often, we focus all of our energies into describing the logistics of service—the whats and hows of being a board member. Those are essential to understanding what is expected, but they’re not enough.

If you’ve recruited well, you have attracted new members who are passionate about the work they will do. They want to connect, directly and indirectly, to the organization’s success. Tell stories and offer examples that give life to the work you do. Make sure some of those stories illustrate the board’s role in that impact. Link their coming leadership roles to what prompted them to say yes in the first place.

More time is devoted to new members’ questions than presentations by others. Remember, new directors already have basic information about your organization and their responsibilities. This is a time for conversation, led largely by the questions they already have and those that will arise as you dig deeper into what it means to serve. It’s also time for them—and you—to check assumptions about how this credit union board functions as a team and a work group.

It can be perilous to have people enter the boardroom with different ideas about how boards work. Discussing perspectives up front, and getting a sense of how governance is enacted in this board, is critical.

This orientation event marks the beginning of the next phase of their board learning journey. When they leave this session, they should:

  • know who has been assigned as their board mentor (and, preferably, met that person). This person will serve as a peer guide, a person upon whom they can call with questions. The mentor is an additional resource who remembers what it feels like to be new.
  • know there will be other opportunities to learn more about specific aspects of their work and about the organization, because yours is a board where learning is valued and embedded in their work.
  • know you will be offering additional, focused sessions on topics of concern to new members (e.g., a follow-up specifically targeting the credit union’s financials).
  • know they will have opportunities to tour the credit union’s headquarters and branches, if doing so was not possible during this initial welcome session.

What it Means to be New

As was discussed in the Nonprofit Spark interview, it takes time to move from new recruit to active, seasoned veteran. However, we shouldn’t excuse new members from stepping up and getting involved straightaway. Indeed, we should find meaningful ways to engage them early in the board’s work, such as assigning them to committees doing work that contributes to the organization’s success.

We facilitate the process of new credit union board members gaining traction by demonstrating to them that they are supported. We enhance their learning and their commitment by structuring meetings for lively, governance-focused discussions, where they are always expanding their potential to lead. We give them reasonable time and space to find a place where they can make a meaningful contribution.

Debra Beck, Ed.D.  brings 30 years of experience serving on, and consulting with, nonprofits and their boards. She has worked with governing bodies at the local, state, regional and national levels.

all in for omnichannel
Karen Bankston
Karen Bankston

arrow with omnichannel wordsFull-fledged omnichannel delivery has arrived at a few credit unions. For others, it is just around the bend. For still others, it remains a distant vision. For all credit unions that aim to serve members seamlessly across remote and person-to-person touchpoints, marketers are working alongside technology and operations colleagues to develop and implement supporting strategies.

At $943 million/65,000-member Xceed Financial Credit Union, for example, Chief Marketing Officer Paris Chevalier says, “Marketing plays a key role in every aspect of the member experience, beginning at the conceptual stage all the way through to design and strategy, and then member outreach and education when we roll out new capabilities or features. We also lead the ongoing process of gathering and sharing member feedback about how we’re doing and what we can do better.”

Collaboration among marketing, IT, e-strategy, and member engagement professionals has been instrumental “in bringing multichannel innovations to our members quickly and efficiently,” says Chevalier, a CUES member, of the El Segundo, Calif., credit union.

What is Omnichannel?

Defining what omnichannel delivery means for your credit union may be the first in a long line of challenges in developing and implementing this strategy. Sam Kilmer, senior director with CUES Supplier member and strategic partner Cornerstone Advisors, Scottsdale, Ariz., notes that this term has reached buzzword status, touted by vendors and research firms oriented toward banking giants. Because omni means “all,” the term may default to “go focus on everything,” which is not all that useful or doable.

“I think the new focus might be ‘How do we recognize that people move across these channels?’” Kilmer suggests. “People might start their interaction with the credit union using their mobile phone, searching ‘Where is the nearest branch?’ or ‘Where is a good place to get a loan?’ Then they may start a mobile or online conversation and complete that conversation in a branch, or vice versa.”

Developing and implementing an omnichannel approach requires all hands on deck.

“Historically, you wouldn’t have both the person who is driving a lot of mobile and online expertise and the person overseeing marketing expertise in the same conversations,” Kilmer says. “The industry has figured out how to transact across multiple channels—by branch, by ATM, by online and mobile banking solutions. The struggle that many credit unions and banks have right now is how to converse and market across multiple channels.”

The end goal is a “tailored experience within a multichannel world,” says Steve Shaw, VP/strategic marketing for digital channels and electronic payments with CUES Supplier member Fiserv, Brookfield, Wis. “Consumers’ expectations change based on the task they are doing and on the way they want to interact with their CU.

“Trying to deliver the exact same type of experience and same content across all these different channels may actually confuse members,” Shaw says. “They don’t want all kinds of details on their mobile device. They just want to get in, make a transaction, and get on with their lives. They expect an entirely different experience when they’re conducting research on their tablet, using an ATM, or interacting with the CU in person.”

In short, a central challenge is about “the optimization of the member experience based on method of engagement,” suggests Tim Daley, a director with Cornerstone Advisors. “How do I make these engagements positive regardless of how you choose to engage with me?”

It’s not just about making sure usability and navigation are right for each device, but designing the verification process and level of information requested for each channel. As just one example, member service reps taking a loan application may ask more and different questions than a smartphone application would require, Daley notes.

At Xceed Financial CU, a central aim of the omnichannel approach “is broadening member access to their accounts at all touchpoints,” Chevalier says. Toward that end, the credit union launched its Xperience Center—the option to initiate a video chat—as a means for members to connect quickly with an associate via mobile, online or other remote access. “We’re adding Xperience Centers, along with ATMs, onsite at some key SEG locations,” she notes. (Read more about this in “Mobile Movers and Shakers”)

The Medium and the Message

For marketers, omnichannel delivery is the latest evolutionary step in using data “to drive the right message about the right product through the right channel at the right time,” says Kevin O’Connor, SVP/chief financial officer with CUES Supplier member CU Solutions Group, Livonia, Mich.

Many marketers already rely on technology to identify members’ product and channel preferences through demographic, geographic and psychographic data analytics. The next level is applying that business intelligence across all the channels members may select. 

“We need to use data to be the medium, the seer into the future, on how they want to engage with us, where they want to engage with us, and when they want to engage with us,” O’Connor suggests.

A crucial tool to accomplish that aim is a system for tracking member interactions across channels so, for instance, branch employees can suggest a product or offer assistance on completing an application based on an inquiry or transaction a member has made via a remote channel, says Mike Eckstein, director of business insights for FocusIQ, a targeted marketing/data program from CU Solutions Group. Thus, optimizing omnichannel delivery entails not only providing superior service across channels but also the ability to track and support those interactions.

“Orchestrating the data, the messaging, and the delivery systems is no small task, and I would say most CUs don’t have the resources or expertise to execute across all these strategies,” O’Connor says. “Managing all the data on how members prefer to do business and developing strategies based on that information is a pretty big task.”

A tandem challenge for marketers is applying brand consistency and aligning key messaging across channels so members receive personalized communications without feeling under siege from repetitive offers, he adds.

Eckstein concurs. “Omnichannel marketing, by definition, is a very responsive endeavor,” he says. “If members are interested in a certain product or service, we need to communicate through the best channels to assist them in their decision-making process. From a marketing standpoint, the messaging and communications opportunities via omnichannel can enable a much more effective way to close the loop on sales.”

Leveraging data and technology to understand how individual members prefer to interact with the CU and which products and services to offer via their preferred channels has the potential to be more efficient than mass marketing, Shaw says.

“Members don’t want to see a banner ad on their mobile device that gets in the way when they’re checking their balance,” he notes. “But if they’re paying a bill on their smartphone, they may appreciate a relevant offer from a merchant available through the mobile channel. If they’re making a loan payment to another institution, they may want an offer for a better rate. Understanding where members want to get those offers and how they want them presented is very much a marketing responsibility.”

Daley agrees. “Marketing has a key role to play in building the omnichannel experience because it can provide that brand value and member experience filter for the rest of the organization.”

Better Together

Technology systems and partners are available to help credit unions collect and analyze the data and develop the content, timing and delivery of marketing messages across channels. However, “fully integrating and implementing to the fullest extent of what omnichannel could be poses a considerable technological challenge in terms of integrating the front-end and back-end systems for a credit union,” Eckstein cautions. “There are some things you can implement for front-end marketing, but full integration of the back-end systems tends to be the more difficult piece of the puzzle.”

Optimally, omnichannel access is delivered through a single uniform platform, which simultaneously provides seamless access for members and allows the credit union “to track, report, and measure any member interactions in any channel,” says Tiffani Montez, VP/operations with Terafina, San Francisco.

Putting that infrastructure in place may require extensive planning to consolidate back-end systems and processes and to communicate with members via channels and offers that reflect their preferences.

But the return on that investment in consolidating systems and streamlining member-facing processes can be significant, Montez says. For example, one CU Terafina worked with found that 17 percent of its members added a second product to their shopping cart, such as a credit card or auto loan refinance in addition to a checking account, when given the opportunity to complete multiple transactions with a single application.

More Than Technology

Integration is tough at CUs that have “bolted on” different delivery systems for products and services, such as credit card processing and online and mobile banking through the years, O’Connor cautions. Marketing, operations and IT specialists need to collaborate on systems and data analytics integration across channels.

In 2013, $300 million/46,000-member SunWest Federal Credit Union’s management team took a long look at organizational philosophy in the light of members’ evolving preferences for remote access. While acknowledging that technology would play a larger role in member service, “we still wanted to remain a people-first CU,” says Jeff Morrow, director of marketing at the Phoenix CU. “We looked for partners to make banking easier and simpler, while keeping the member relationship top and center.”

To accomplish those intertwined goals, SunWest FCU decided to consolidate its website and online banking and launch a mobile app through a single provider, Fiserv. Planning and implementation was led by a cross-functional work group of marketing, IT, operations, call center and training specialists. At the same time, the credit union also expanded its ATM network and remodeled branches to underscore its omnichannel commitment.

Even after the new online and mobile channels were introduced in June 2014, the group has stayed in business, continuing to spearhead new initiatives, including an overhaul of the website planned for this year.

Omnichannel conversations “almost always start with ‘What technology do I need to buy?’” Kilmer says. “Generally speaking, for every amount of effort or resource you put into a new technology, several multiples of more effort are required to figure out all the processes that work across them to connect systems and get people working better together.”

As one step toward integration, Kilmer suggests eliminating from your vocabulary the word “department,” which implies a separation and segmentation of responsibilities.

“The people who do marketing—which is a lot of people in the credit union, not just people in the marketing department—work throughout the organization,” he insists. “Sales, service and delivery are converging into an integrated user experience.”

Karen Bankston is a long-time contributor to Credit Union Management and writes about credit unions, membership growth, marketing, operations and technology. She is the proprietor of Precision Prose, Middleton, Wis.

a technological assist
Pamela Mills-Senn
Pamela Mills-Senn

computer with people in the backgroundVA Desert Pacific Federal Credit Union is a pretty lean organization. Headquartered in Long Beach, Calif., with a second branch in Los Angeles, the credit union has 5,410 members, $61 million in assets and 15 employees total.

The CU’s culture is all about working effectively and encouraging staff to make the best use of their time, says CUES member Shareta Caldwell, VP/human resources. She also embraces this mindset when it comes to her position. 

HR technology provides Caldwell with an essential assist in this effort. Her tools include a free benefits-management program from Zenefits, onboarded during the last quarter of 2015. Caldwell is using this to manage records and data related to hiring, termination, medical and disability benefits, and more. The program also tracks paid time off and sick time.

Prior to deploying this software, Caldwell had to log on to the various provider websites to handle all the components involved in benefits. Now, she just goes to the Zenefits website to get the job done.

“It’s not just the number of employees that matter, it’s what you have to do for each one that can be so time-consuming,” Caldwell says. “This program has freed up my time and allowed me to work on other areas of HR.”

Under Pressure

Like VA Desert Pacific FCU, credit unions across the board, regardless of their size, are faced with having to maximize their efficiencies, reduce paperwork (becoming greener in the process), and run more profitably. Saving time, and therefore money, is a big motivator and why many credit unions are turning to HR tech tools, agrees Joseph T. Sefcik Jr., president of Employment Technologies Corporation. Located in Winter Park, Fla., the company develops simulation-based talent prediction/hiring systems. Avoiding costly mistakes is another important motivator, he adds.

“In real estate, it’s all about location, location, location,” Sefcik explains. “In screening and hiring, it’s about accuracy, accuracy, accuracy. Screening and qualifying talent isn’t easy because applicants intentionally want you to see only their best side. [Plus] we all have our own experiences and blind spots that can negatively influence our decisions.”

HR Tech Resources

CU People, Inc.: Provides customized human resource solutions for the financial services industry. CU People’s InfinityHR software solution, which automates benefits enrollment and benefits administration, enables credit unions to handle employee lifecycles—from hire to retire. The Web-based HR management system provides online benefits enrollment and supports other HR functions as needed; allows employees to enroll in and change benefits information on their own; centralizes HR and benefits data into a single system; and more.

Employment Technologies Corp.: Provides simulation-based talent prediction systems designed to replace traditional employment tests. Products are offered under the EASy Simulations brand name. The company offers a suite of products for all phases of the HR process, such as employment branding, company and job previews, virtual online interviews, structured employment interviews, and job practice/rehearsal simulations.

Watershed Systems, Inc.: Watershed, the company behind Learning Tracker, is tailored for evaluating learning programs, aggregating data from different systems, providing a complete view of learners. CUES members can collect different types of learning data, analyzing it in one place. CUs can create profiles for each employee, attaining a holistic perspective of their professional learning and ensuring their investment in learning is used for the greatest impact. CUES Learning Tracker also automatically tracks activity, allows for self-reporting of learning activities outside of, and more.

Zenefits: Provides a free cloud-based HR automation platform—Zenefits Management Software—that connects with (or helps users set up) payroll, benefits and other HR systems, enabling credit unions to manage their disparate HR systems all in one place. In addition to the HR management tool, the company recently added Zenefits Payroll and Zenefits ACA Compliance Automation. Both are also free (though the payroll service does include a paid option). Zenefits keeps its services (mostly) free because it serves as a benefits broker, collecting fees from multiple benefits providers.

Additional Resources:

Achievers: Provides cloud-based employee recognition software.

Hubbub Health: Offers technology-driven wellness solutions.

Hyland Software: Offers OnBase, an enterprise content management system.


Technology takes the subjectivity out of the hiring process, resulting in a more objective and consistent experience for both applicants and interviewers. This not only ups the likelihood of identifying the best prospect and making a better hire, it can also help credit unions avoid legal problems, for example incurring accusations of discriminatory hiring practices.

Another advantage of the simulation software is that it gives credit unions a more effective way to tell their story and define their brand to applicants, providing a more accurate and comprehensive picture of what it’s like to work for that particular organization, says Sefcik.

Technology also makes staying in compliance with the various regulations affecting HR operations easier and likelier, protecting credit unions from incurring violations, says Jessica Hoffman, VP/communications for Zenefits, San Francisco.

“Today, like many others in HR, CU HR professionals are responsible for complying with dozens of regulations, and the penalties for not doing so can be costly. And the challenge has continued to grow with laws like the Affordable Care Act,” Hoffman says.

Eileen Westbrook, EVP/business development for CUES Supplier member CU People, Inc., Sugar Land, Texas, is seeing more credit unions moving to Web-based systems, particularly when organizations increase in size, making it much harder—and riskier—to manage employee data on spreadsheets.

“Now, with the ACA, systems like these are no longer nice to have; they are must-haves,” she says. “Trying to track ACA manually is nearly impossible, especially if a credit union has variable-hour employees.”

Perhaps one of the most significant pressures facing many CUs is the push to grow their membership and hold onto their members, both of which depend heavily on delivering a high-quality customer experience. This in turn requires that employees receive appropriate and effective training.

Evaluating learning and training programs, as well as employee competencies, can prove challenging, but it’s critical if organizations are going to be successful, says Mike Rustici, CEO of Nashville-based Watershed Systems, Inc., CUES’ partner in CUES Learning Tracker, which is a CUES member benefit. The company provides a reporting tool that allows CUs to monitor employee education.

“HR software can benefit CUs by helping advance the professional growth of employees,” Rustici explains. “More CUs are investing in [these systems] and in related learning programs as a way to improve the service level they offer and to also improve employee retention and satisfaction.”

Finding the Fit

There is certainly no dearth of HR technology solution options. In fact, says Hoffman, they’re so abundant that deciding upon a tool can feel overwhelming. But at the same time, finding the right HR tool is critical because if the fit is wrong, even the best technology will fall short of expectations.

And don’t overlook vendor fit; this is crucial to success as well. To ensure the best possible outcomes, CUs must put on their detective hats and put tool and vendor under (gentle) interrogation. Of course, some of the questions CUs should be certain to pose will vary depending on the technology under consideration.

“When a CU is considering a new HR technology vendor it is important to ask targeted questions related to the provider’s qualifications, the quality of the product, its accuracy and reliability, legal defensibility, time and cost savings,” says Sefcik. “Also ask how many mistakes it will help the CU avoid.”

He suggests credit unions exploring a talent prediction/hiring software solution ask how the tool’s selection process prepares job candidates to interact with the organization’s members and if a plan for onboarding and performance coaching is provided.

Other questions to ask, or factors to take into account, include:

Rustici: Is the system under consideration compatible with other major HR programs and is it compatible with the HR software already in place?

Westbrook: Is the solution Web-based/hosted? Does it integrate with payroll? Can benefit elections and changes be sent directly to the carriers? Does the vendor offer full HRIS and is this a single system or different systems? Also ask if ACA is part of the product offering.

Hoffman: What HR functions does the software help with; for example, onboarding, off-boarding, IRS filings, health insurance and benefits, etc.? Does it offer compliance tools? Does it include payroll? What data protections are in place? What are the costs? Will we need to sign a contract? Can you provide customer references or case studies to validate the software’s efficacy?

Before purchasing any HR technology, Rustici says credit unions should identify who will be using the technology and determine how much time the users will be able to dedicate to the program. “If a program appears too complex or that no one will be able to use it, there’s no point in purchasing it,” he explains. Then, build a strategy, identify goals, establish metrics and specify the desired outcomes.

Westbrook says it is important to consult with all employees about their specific needs before moving forward with a decision. “Often the software is chosen by one person without consideration for other users,” she explains. “Also, consider whether or not the technology is a scalable solution that encompasses future needs and covers the entire employee lifecycle.”

Credit unions should also know exactly what they’re paying for, and evaluate if the technology could be giving them more than they need, says Caldwell. For example, she says, when it comes to payroll software, it’s common to pay for an array of services that end up not being used, especially if the credit union has fewer than 50 employees.

Pamela Mills-Senn is a freelance writer based in Long Beach, Calif.

verifying online ids
Richard H. Gamble
Richard H. Gamble

identity theft conceptOn the surface, letting faceless people join your credit union and open accounts there in the dead of night over an Internet connection seems very risky. In fact, CUs doing it have good tools and experience few losses, but it does take some vigilance.

When it comes to fraud prevention, security around online account opening is not the top priority for CUs that offer it, but it’s likely in the top five, estimates Vincent Hui, senior director at CUES Supplier member and strategic provider Cornerstone Advisors, Scottsdale, Ariz.

“There’s the risk that someone might defraud the credit union or its members, and the risk that someone might use the credit union for money laundering or terrorism finance,” he says. “The number of incidents may be small compared to debit fraud, but they can’t be overlooked.”

There have been losses, for example, at $583 million Credit Union West, Glendale, Ariz., which has offered online account opening for about a year and a half.

“We’ve been burned, but not too bad,” reports Robert MacGregor, CCE, president/CEO. Fraudsters have tried to open bogus accounts and use them to move money around. Others have opened depository accounts as a foot in the door to try to get loans or credit cards, he explains. “We have a good risk management team, but we’ve been through a learning experience.”

The biggest lesson learned was to apply geographic restrictions, says MacGregor, a CUES member. “If they’re not local, they’re suspicious,” he summarizes. “Now we only allow automatic online account opening within our two-county field of membership.”

The second lesson was to kick out any applications that seemed at all suspicious or irregular for person-to-person phone verification. “If there’s anything unusual, our crew takes over and walks them through the process by phone,” MacGregor explains. “This usually happens pretty quickly, but not always the same day.” The crew has access to databases that let them ask personal questions. “If you’re not who you’re claiming to be, usually you can’t answer such questions.”

A third lesson was to only allow an online account opener to start with a depository account, MacGregor says. “We won’t open our full portfolio of products until they prove themselves,” he explains. “If they’re trying to pull something, they’ll try for overdraft protection right away. We won’t give them that.”

A fourth lesson was to join a group of local financial institutions that share information about fraud experiences and attempts. “Many of the bad guys try the same thing up one side of the street and down the other,” MacGregor notes. “They don’t care whom they defraud, and that makes them stick out.”

Vendors offer a similar, but not local solution. Bottomline Technologies, Portsmouth, N.H., offers a proprietary product called FortiFI that combs its database of 500+ financial institutions’ online applicants, reports Chris Biliouris, senior product sales specialist for digital banking.

“We might see that an applicant has attempted to apply at 15 other financial institutions within our network,” he explains. “A fraudster may use different identities, while leveraging the same email address or mobile phone number over and over. FortiFI flags suspicious activity like this in real time. Prevention is time-critical, and it often takes time for credit bureaus to see what’s happening.”

Regulatory Imperative

Online account opening is fundamentally safe because it has to be.

“When the examiners come in, they’ll take a deep-dive look at your online account opening. If you’re not meeting their expectations, you will be very quickly,” notes William D. Fulk, EVP/chief operating officer at $1.1 billion Columbia Credit Union, Vancouver, Wash.

Fraud has been almost nonexistent in the year and a half Columbia CU has offered online account opening, reports Fulk, a CUES member. Its online account openings, supported by ID Authentication and Esign, are highly effective at verifying that an invisible applicant is who he says he is, Fulk reports.

Accounts are opened through an automated verification and approval process, but any irregular opening generates a phone call to the applicant. There’s no telling how many fraudsters start the process because Columbia CU, like most that offer online account opening, sees a lot of abandoned applications.

“It’s always a challenge when you can’t see the person and match their appearance to a photo ID,” reports Rick Blood, CSE, SVP/member services at $1 billion U.S. Federal Credit Union in Burnsville, Minn. “We’ve opened over 1,000 accounts and only had one loss.”

The automated verification process is very effective, he says. “It’s very hard for a fraudster to know the answers to out-of-wallet questions like ‘What color was your 1978 Ford Pinto?’ If we get a blank or wrong answer to one of those questions, the account is not approved automatically but goes to our fraud queue for further investigation. We may direct them to go to a branch.”

Online account opening is secure in part because it’s a product CUs typically buy from vendors, and it comes with built-in security. “I believe the majority of CUs are adopting out-of-the-box or core-based vendor solutions for online account opening,” notes Daryl Jones, a director at Cornerstone Advisors, “and the vendors have imbedded security and compliance around their systems.”

Gro Solutions, Alpharetta, Ga., for example, offers an SAS option that many financial institutions choose that’s “very standardized, very compliant and very efficient,” as well as a more customizable option that the largest FIs sometimes pick, says Paul Mackowick, chief revenue officer. It’s available as OpenAnyware from Bluepoint Solutions, Henderson, Nev.

Notably, Gro Solutions also offers data extraction to fill in the loan app and ID verification by scanning driver’s licenses. (Read about this in “Pre-Populating Data Key to Mobile Account Opening” at the bottom of this article.)

Credit unions can provide security and not rely on vendors, but doing so is typically a low-tech endeavor. For example, a CU can post a static online form that an applicant fills out and submits to a queue for a person to review and approve, often after printing it out, Jones reports. The form, as well as the review, authentication and approval process, are essentially the same as when a person applies in a branch or through a call center, he explains. But it might not be enough to draw in tech-savvy members and potential members and get them to complete the process.

So much of the time, the building blocks for fraud prevention have to come from vendors, Hui observes. Even the very largest CUs “don’t have the expertise to build and maintain their own front-line validation procedures.” But he emphasizes vendors, plural.

“Many vendors are point specific,” he notes. “Whomever your online account vendor is should provide embedded security, but you have to consider how well that integrates with other systems if you want a holistic approach to risk management.”

Most CUs pretty much do the same thing and rely on vendors to make it work. But not entirely, Fulk insists.

“There’s a tradeoff in how many roadblocks you set up to deter fraud,” he notes. “The stronger the protection, the more onerous it may be to legitimate applicants. Each CU has to determine its own risk tolerance.” The core validation protocols are built into the products Columbia CU uses, he says, but “we add some pieces of our own.”

The automated verification process at U.S. FCU is also part of a vendor package. “We use MeridianLink," Blood says, “but there’s still a lot of work on our part. After every online account opening, we make an outbound call to the applicant to welcome them, explain our services and find out how satisfied they were with the online experience,” he explains, “but we’re also alert to anything that doesn’t make sense. Sometimes we discover things that cause us to close the account.”

In spite of all these precautions, one bad account slipped through. “They passed all the tests, opened a credit card account, ran up a balance and then never paid,” Blood explains. “You just can’t prevent every loss.” But you catch all you can.

“Once a routine welcoming letter from our CEO brought a call from the person, who said, ‘I didn’t open an account at your credit union.’ We closed that one right away. It takes more than a vendor package,” he notes.

Pre-Populating Data Key to Mobile Account Opening

Opening an account with a mobile device is a very different experience from opening one at a desktop computer. At a desktop, the user is seated and comfortable, usually not in a hurry, notes Paul Mackowick, chief revenue officer of Gro Solutions, Atlanta.

At a desktop computer, the member has a full-sized keyboard and entering data is manageable. A mobile consumer seeking to open an account may be on the run and is working with a tiny keyboard. What’s tolerable online is likely to be frustrating on mobile.

“Data entry has to be minimal,” he notes.

Being asked to enter too much data is probably why 80 percent of the consumers who start to open an account with a mobile device never complete the process, compared to about 35 percent who abandon an online account opening, according to Mackowick.

To reach potential members, mobile needs to leverage technology that allows pre-population of every bit of data possible. For example, GPS technology embedded in a smartphone can automatically capture information about an applicant’s location. And it’s possible to lift information off a driver’s license by scanning the data from the bar code on the back of the license, much like passing the mobile device over a QR code. Better yet is linking the app to the mobile carrier so the applicant only has to push one button and the account application fields can be populated automatically from the carrier’s billing database.

With all that data entry eliminated, applicants only have to enter the type of product they want and, for a depository account, key in how they want to fund the account. A few banks and credit unions are already using this technology, and they have found that the abandonment rate is now at parity with the online applications at around 35 percent, Mackowick says.

$1.1 billion USALLIANCE Financial revamped its online account opening technology in the first quarter of 2015, and its experience matches Mackowick’s projections—an abandonment drop-off from roughly 80 percent to about 35 percent, reports CUES member Kristi Kenworthy, AVP/e-commerce for the Rye, N.Y., credit union.

“We’ve definitely streamlined the process to improve the user experience, using GPS technology, email parsing (which grabs first and last names) and driver’s license scanning,” she reports. “There are ingenious ways to populate data fields on the application automatically.”

Downloading from carrier databases was not available from Gro Solutions in early 2015, so it’s not part of the current USALLIANCE Financial product, reports CUES member Tori Burton, VP/marketing. “We’ll analyze it and consider it for the next iteration,” she says. “Technology keeps improving.”

These technology breakthroughs have become available just in time, because members clearly want to use the mobile channel. In 2013, 25 percent of the consumers who tried to open an account remotely used a mobile channel, Mackowick notes. By 2015, it had grown to 39 percent.

Richard H. Gamble is a freelance writer based in Colorado.

unconventional thinking capital is king
William J. (Bill) Rissel
William J. (Bill) Rissel

colorful lightbulbRetaining earnings that could be returned to members has long been a controversial subject for credit unions. I remember calls in the 1980s for 3 percent capital evoking moans of “It can’t be done” and “All this capital is unnecessary!” Decades later, new National Credit Union Administration capital standards of 7 percent drew similar responses. Now, risk-based rules that tie capital to a CU’s asset allocation are final. These make crystal clear that more capital is desired by regulators and provides more flexibility for CUs.

The Value of Capital

Capital resides on the “liabilities/equity” side of the balance sheet along with member shares and borrowings. To attract and retain savings (such as regular shares, certificates and money market accounts), the CU must pay dividends. It must also pay interest on borrowed funds. This “cost of funds” is one of a CU’s largest expenses.

Fortunately, residing on this side of the balance sheet is an account that costs the CU absolutely nothing: “equity,” aka capital.

chart 1The building of equity should be thought of as a strategy to partially offset funding expenses of the CU. The more equity/capital you have, the more expense is offset. The chart at right describes two $800 million CUs that are identical but for their equity levels:

Note that Credit Union B has achieved the same asset size as A, but with a higher level of zero-cost capital. Credit Union A must pay an average of 3.2 percent on an additional $32 million in shares ($712 vs $680) to achieve the same asset level. These savings flow directly to the bottom line, increasing Credit Union B’s ROA by nearly 13 basis points. With assets of $800 million, this amounts to a $1.04 million advantage in net income due solely to higher levels of equity/capital.

Capital When Rates Rise

Moreover, the value of equity increases as interest rates climb. An increase in the cost of funds by 50 percent results in the chart on the next page.

Now Credit Union B has an advantage of 19 basis points. This translates into a 50 percent difference in net income. Similarly, the value of having higher equity has grown 50 percent to $1.52 million per year.

chart 2Capital Accumulation

Some CUs have had success with interest rate rebates and/or bonus dividends. These programs have philosophical feel, but no financial benefit for the CU. Building and retaining higher levels of equity/capital benefits all members, in perpetuity, by reducing a major cost. That savings may be used to benefit members and the CU.

During my career as a CU CEO, we built equity to over 14 percent (from 7 percent), while growing assets from $120 million to $1.2 billion. Higher capital levels lowered our costs and helped our CU return more value to members year after year. We did this through higher rates on savings, lower rates on loans, and lower fees while, at the same time, consistently achieving one of the nation’s top ROA ratios.

Given the new RBC rule, higher capital levels will allow flexibility in asset allocations and, perhaps, make exams a little less painful.

Exercise 1:  Discuss your CU’s capital accumulation trends. What is the value of its capital? Exercise 2: Assess your current/projected RBC position. What actions should your CU take now—well ahead of the new rule’s implementation date of Jan. 1, 2019?

William J. (Bill) Rissel is retired from 23 years as CEO of $1.2 billion Fort Knox Federal Credit Union. He served two years with distinction on the Federal Reserve Bank’s Community Depository Institution Advisory Council. He occasionally assists CUs in financial management and governance issues. Reach him at 941.626.0330 or

the right questions
Jim Kasch
Jim Kasch

check marksThanks to technology and social media platforms, consumers today are more empowered than ever before. They research every potential purchase and interaction, no matter how trivial, before committing. Comparative websites like Yelp! and Google Reviews provide social platforms for consumers to share experiences, complete with grades and comments. In fact, millennial consumers are more likely to take advice from strangers online than they are from the companies’ employees.

Companies that succeed in this new environment take an active role in building continual conversation channels between their customers and the company’s executives. After all, how well can the company adjust its offerings to meet the expectations of its customers if it doesn’t bother to ask?

Surveys are an effective tool but most of the time they aren’t providing actionable information to management because they aren’t asking the right questions to the right members at the right time.

Here are five critical things your current member survey isn’t telling you:

1. Member Satisfaction Doesn’t Matter

Credit unions love to crow about their exemplary member satisfaction scores, particularly compared to banks. But if our members are so satisfied, why is it such a constant fight to grow? Your survey doesn’t answer that for you because satisfaction doesn’t necessarily equate to loyalty, and that’s what we should care about.

There are two types of consumer loyalty: attitudinal loyalty (how a consumer feels about the company and its products) and behavioral loyalty (how much business the consumer actually transacts with the company). A consumer may be attitudinally loyal to a company like Tom’s, the shoe company that donates a pair of shoes for every pair it sells, but she may not actually OWN any Tom’s shoes. Other consumers may be behaviorally loyal to a company like Walmart, but only because they don’t have better alternatives available.

The bottom line is that credit unions need to see both types of loyalty, and your member survey doesn’t capture all the important elements.

2. Reduce Member Effort

A few years ago, the CEB conducted a three-year study of more than 70,000 consumers in an attempt to understand what builds loyalty in service environments. The study had two critical findings:

  1. Delighting your customers does not build loyalty. Reducing customer effort (by making it simpler to do business with you) builds loyalty.
  2. Acting on this insight can improve business results and reduce expenses.

This is especially interesting because most CUs stress exceeding their members’ expectations in every transaction. In fact, many CUs have built these expectations into their mission or vision statements. One passage from the CEB study in particular stands out:

“Telling reps to exceed expectations is apt to yield confusion, wasted time and effort, and costly giveaways. Instead, stress the concept of making it easy.”

The point is simple: The easier it is for your members to do business with you, the more business they’ll do with you. Your member surveys, including daily transactional surveys, should gauge that effort.

Further inquiries should yield specific ways in which the credit union can make it even easier for the members. For instance, if the member responds that it was difficult to change their address with the CU, your survey should ask how it could have been made simpler. Some members may respond with “make it available to accomplish online” while others may say “branch operating hours are inconvenient.” Weighing the responses will help management determine which initiatives should be undertaken first.

3. Your Members’ Key Drivers

Your surveys may provide volumes of information, but they aren’t defining the most important aspects of your business, according to your members. Understanding these key drivers will enable management to allocate resources to reduce effort and improve results.

Many credit unions utilize Net Promoter Score to predict future business results. This decade-old metric is widely recognized as the best indicator of attitudinal loyalty, and ample results are available for peer comparisons.

Typically, credit unions score between 50 and 60 on their Net Promoter Scores. For comparison, most of the Big Four banks have a negative NPS. (USAA continues to be the standard-bearer in financial services with its NPS consistently above 80).

To understand your members’ key drivers, your survey should follow up the NPS response with an inquiry to understand why members responded how they did. Additionally, the survey should prompt members to offer one thing to change about the CU. Finally, members should be asked to grade the CU again if the institution actually made the change suggested by the member.

Of course, asking these questions isn’t enough. You must analyze and organize the responses in a meaningful way. Gathering these various responses and calculating the weighted improvements from the various suggestions will yield actionable insights for the management team.

Thousands of responses like this can be evaluated and quantified to identify specific projects or initiatives that could be undertaken. These can be organized into key driver categories that correspond to the credit union’s value proposition (superior value, convenient access, etc.).

4. Who is Saying What, Exactly?

Your member surveys probably provide demographic perspective to the responses. For instance, members of this branch reported this, millennial members reported that. To accomplish this, the survey likely asks members unnecessary questions to qualify their responses. Does your survey, for example, ask members when they joined the credit union? Does it ask if the member has a checking account with your credit union? Shouldn’t you already know that?

Frankly, what does it say to your member about your credit union if you need to ask them these questions? Respondents experience survey fatigue when you unnecessarily ask questions, causing response rates to go down.

Further, your surveys aren’t assigning specific responses to individual accounts. Sure, you know 25 percent of your members responded that they would be in the market for a new car in the next year, but do you know which 25 percent? You know 60 percent of your members responded that they would refer a friend or family member to the credit union, but do you know which members?

Finally, an important component of behavioral loyalty is account growth of specific households. How else to demonstrate behavioral loyalty than to actually increase the number of accounts or balances one has with the credit union?

To accomplish this, your surveys must integrate directly into your core system, marketing customer information file, or member relationship management platform. Doing so provides substantially more background information to improve your ability to analyze responses and, ultimately, improves your ability to make sound marketing decisions. Connecting this information to the core system begins with initially extracting more data than simple contact information (e.g. demographic data, relationship status) and appending it upon survey completion. The depth of the data will depend on what’s available to you and your core/MCIF platform. Your survey provider should be able to help you.

5. The Big Picture

The most successful companies in the world have comprehensive mechanisms to gather and analyze consumer insights continuously. For instance, visitors to a Disney theme park may have encountered cast members equipped with electronic clipboards performing quick surveys with park guests. Disney performs millions of these surveys every year, and the responses help them make “on the fly” improvements to the guests’ experiences.

Your member survey program should be comparably comprehensive. It must be more than an annual (or bi-annual) satisfaction survey. It should include transactional surveys for teller line, member service, and call center transactions. These daily surveys should be conducted as close to the time of the interaction as possible, and the interactions should be more than simple monetary transactions.

Your program should include surveys for new memberships and other new accounts. These surveys in particular will help quantify member effort, and can generate numerous process improvements. Sometimes they can also yield cross-selling opportunities potentially missed at the time of the account opening.

Your program should also include surveys for members who have recently left the credit union. One of the major findings of the customer effort study was the importance of leveraging feedback from disgruntled members to improve the experience of current members.

Taken together, these surveys will help your credit union make better decisions about its future.

Jim Kasch is the founder of Member Intelligence Group, which helps credit unions gain actionable insights from their members through surveys. He can be reached at

the pricing spectrum
Karen Bankston
Karen Bankston

colorful price tagDesigning deposit and loan products that stand out in the marketplace can encompass creative flair in pricing, especially now that there is a bit of play in the interest rate environment.

In recent years, credit unions have been forced to contend with rate compression, with pricing “bound by zero” as the lower boundary, says Neil Stanley, CEO and founder of The CorePoint, Omaha, Neb. As rates begin to rise, there will be more possibilities to price savings and loan products in a way that sets them apart from the competition.

“Certainly a rise in rates will bring pricing as a science and art more into focus for financial institutions,” Stanley notes. “Credit union managers may see opportunities to do things with rates that they were intimidated from doing in the recent past.

“Pricing is the biggest missed opportunity in our industry because executives at most financial institutions feel inhibited,” he adds. “They haven’t been exposed to the breadth of price differentiation and value creation. They tend to view their own products as commodities. If that’s the case, members would be tempted to commoditize providers of financial services as well. They don’t always see the nuances of the various offerings so they may see them all as more or less the same.”

In contrast, he suggests that CU executives think about pricing as a spectrum, informed by both market rates and the value the CU adds in designing deposit and loan products to meet members’ needs and preferences. The market imposes a “reference rate,” and the higher that rate is, the more room the CU has for discretion in pricing decisions.

Getting Philosophical

One big picture issue is consciously agreeing on a pricing philosophy. Community banks generally focus on improving profitability, whereas CUs are typically viewed as promoting fairness through pricing.

“Credit unions want a disciplined pricing approach that is fair and efficient, and there needs to be a philosophy to guide that,” Stanley says. “It’s not just about pricing loans to be in the middle of a comparative sample. Executives need to understand” what they’re looking to accomplish with their pricing.

The philosophy at $1.1 billion CoVantage Credit Union is “to lend a little bit deeper for members” and to price based on credit risk and the rate environment, as opposed to a market comparison, says CUES member Charlie Zanayed, CSE, SVP/chief retail officer for the Antigo, Wis., CU serving 85,000 members.

For example, CoVantage CU will loan up to 125 percent of new car price for just 0.75 percent more than the rate for a loan with a 25 percent down payment. The CU will make loans for more than 125 percent of the car price at its unsecured loan rate, which stood at 6.24 percent in late December.

With its community development financial institution certification, CoVantage CU adheres to its commitment to serve the financial needs of low- to moderate-income members by offering relatively low rates as an alternative to finance companies and banks charging “whatever the market will bear,” Zanayed notes.

This commitment also extends to offering the type of credit lower-income members want and need, he adds. Last October, for example, CoVantage CU made 503 unsecured loans of $1,000 or less.

“You don’t really make money on those kinds of loans, but you are serving members’ needs,” he says simply. “But if you serve a niche of people that others are ignoring and you do so responsibly, you can make money. We try to do well by doing good.”

Members respond by paying their loans: The CU’s 60-day delinquency rate as of third quarter 2015 stood at 0.45 basis points. And the CU made enough money to “pay patronage,” or return to members, $2.1 million in 2015, a 22 percent increase over the previous year.

The CoVantage CU philosophy to offer favorable rates to members is reflected in another aspect of its auto lending. Though the credit union does offer indirect loans, it limits the dealer reserve fees it is willing to pay to build business through that channel, preferring instead to “pass on better rates to members, so that our rates are extremely competitive,” Zanayed says. “That allows our direct loan business to grow faster, up 10 percent in 2015.

“Some financial institutions are paying 3 percent on dealer reserve, which pushes up the average payoff to over two years,” he adds. “We prefer to compete on rate and speed of processing. You can give up a lot of margin on indirect loans, and you end up not being able to pass that back to members. We look at margin management holistically.”

As go Prices, so go Profits

Maximizing profit is not the sole aim of credit unions, but they must manage revenue production to maintain adequate levels of capital to grow the credit union. Pricing has the biggest impact on profit, Stanley notes. As business studies have shown, an incremental change in pricing has a much more substantial effect on profit than a corresponding reduction in costs.

“A one percent change in price of offerings has a much bigger impact on profitability than a one percent reduction in either fixed or variable costs,” he explains. “Many financial institutions have focused so intently on reducing their costs of production—and they needed to do that in this very competitive world—that it’s unlikely they’ll be able to squeeze much more out of costs.”

In setting prices for various products, managers also need to consider the range of preferences among members. Some value quick answers, an express lane for choosing their financial providers and products. Those products should be priced at a premium for that convenience. Other members have the time and inclination to shop more carefully and to examine and negotiate over details.

The medium also matters. If your strategy is to promote offers in mass advertising and Internet banners, you are choosing to position your products for self-selection by members as commodities where the lowest price wins. For example, many mortgage options have been commoditized to conform to secondary market standards.

An alternative is “to create value that goes beyond the commodity” by offering some options through consultations in which financial professionals engage with members individually, an arena that permits more refined pricing, Stanley says. This one-on-one approach addresses members’ individual circumstances and identifies solutions tailored to their needs.

“When people are working with their life savings, they tend to want some reference points. They want to talk with somebody about their options,” he says. “The vast majority of people, when managing substantial amounts of money, will want to get the reaction and ideas of others as they do that.”

The CorePoint has structured a product designed to appeal to rate-shoppers, providing credit unions with a tool to retain maturing CD funds at reasonable rates. The Limited Edition Savings account offers rates similar to CDs, but without term commitments or early withdrawal penalties. As a product designed to defend deposits, not attract new money, it is only offered in consultation with members who are obviously weighing their options for a maturing certificate.  

This tactic of differentiation is useful in serving the needs of a “vocal minority” of members who take the time to call in or stop by looking for a better deal. “You have to understand, ‘What’s our boundary in dealing with these members?’ That’s when it helps to have pricing in place that is scalable,” Stanley says.

Attention all Savers

$4.7 billion, 297,000-member Patelco Credit Union has launched two savings products exemplifying creative pricing. The Money Market Select Account, introduced in March 2015, is designed to bring in new deposits with a reverse-tier strategy that especially rewards smaller savers. The account pays 3 percent on balances of $2,000 or less, 2 percent on funds in the next tier up to $5,000, 1 percent in the third tier up to $10,000, and so on, up to a 0.2 percent return for funds above $100,000.

“We wanted to grow assets, and at the same time, members were saying, ‘You’ve got great loan rates, but what can you do for savers?’” says CUES member Melissa Morgan, chief retail officer of the Pleasanton, Calif., credit union.

“Typically, the more money you have to invest, the higher rate you can find,” she notes. “We decided to be somewhat disruptive and do the opposite.” The strategy generated positive feedback and provided motivation for members to focus on growing their savings. Patelco CU settled on a money market account in response to members’ preference to remain liquid amid so much uncertainty over market conditions and interest rates.  

“We are committed to helping our members improve their financial health and resiliency. One of the best ways to start is by setting aside liquid funds for emergencies,” she explains.

Overall, deposits grew by $363 million in the 10 months after introducing this option, which accounted for the majority of new deposits. The Money Market Select Account has been popular with new members, with existing accountholders who automatically got the new rates, and with members who moved their money from other financial institutions where it had been “sleeping on the sidelines,” Morgan says. In addition to funding their own accounts, parents and grandparents opened accounts for their children and grandchildren to get the great rates.

Act 2 of Patelco CU’s novel savings options is a Rising-Rate CD, introduced in October in anticipation of the Federal Reserve’s year-end rate increase. “Our commitment was to be out in front of any rate increase,” she says.

The certificate, with a rate that rises annually regardless of what’s going on in the market, is designed to appeal to savers who might be waiting to see how rates change. “We take the guess work out of attempting to time rate changes,” Morgan says.

Before offering its remarkable savings rates, Patelco CU was very careful about managing its exposure, she adds. “We built in protections by hedging with our investment portfolio and carefully monitoring the impact to our overall portfolio. At the end of the day, we are giving our members two great reasons to build their savings and improve their financial health at Patelco.”

Care in Pricing Loans

On the lending side, CUs need to take care with rate differentiation to avoid even the appearance of disparate treatment of members in protected classes, Stanley says. The key is to stay focused on members’ behavior, not demographics or geography, the latter of which may create the appearance of red-lining.

 “The question becomes, ‘What can credit union managers do to get more of the rates they want?’” Stanley says. The answer lies in “structural negotiation,” or the presence of many variables that allow a wider range of offers. This range is greater in commercial loans as business members present a variety of collateral positions, balance sheets, and borrowing needs. Every business loan offers a unique risk-reward profile and thus can be priced individually.

“If an organization ever says that it prices fairly because it offers everyone the same rate, that is the exact opposite of fairness,” he contends. “The result is adverse selection. If you offer a narrow price range, you will attract most what you least want. When it comes to credit, offering one rate today for a business loan, say 4 percent, may attract the most marginal borrowers, who don’t have a lot of options to shop elsewhere. Distressed borrowers think the rate is great, and everyone else thinks it’s too high.”

Heading off a new Competitor

Departing from a typical approach to pricing personal loans may help CUs respond to an emerging competitive threat from peer-to-peer lenders like Lending Club, suggests CUES member Bill Vogeney, senior EVP/lending/finance with $4.3 billion, 240,000-member Ent, Colorado Springs.

Early on, Lending Club catered to credit-challenged borrowers, but recently has been reaching out to consumers with good credit, he notes. Other online lenders are widening their reach, such as SoFi’s shift from refinancing student debt to sending competitive prequalified credit offers to a broader audience.

“These marketplace lenders are a threat to credit unions, and how are we responding?” Vogeney asks. “The average lowest personal loan rates offered by credit unions are still above 10 percent.”

In 2012, Ent decided to lower the rate on personal loans to increase overall portfolio yield; the rate for members in higher credit tiers declined from 10.9 percent to 7.5 percent. Within 60 days, monthly volume grew from $600,000 to $2.5 million. When the CU tested a prequalified personal loan offer with mobile and online fulfillment and front-line promotional support, volume rose to $4 million monthly. The “new normal” is in the $3 million to $3.5 million range.

According to its marginal pricing model, Ent needed to increase loan volume by 50 percent to recoup the revenue from lowering the rate, so this strategy has definitely been a money maker, Vogeney says. And the increase in personal loan volume helped achieve a three-year goal to increase the loan-to-share ratio from 71 percent to 80 percent in just one year. It’s now 91 percent.

The CU’s delinquency rate as of Dec. 31 was 0.32 percent over 60 days past due. The net charge-off rate for the 12-month period ending Dec. 31 was 1.15 percent.

These types of strategies can provide a boost to net interest margins stymied in a low-rate environment. “We’re probably an outlier in that we’ve seen net interest margins increase over the last 18 to 24 months. It is possible to lower rates and drive sufficient volume to produce marginal income,” Vogeney says.  

Getting Back in the Game

Before the Great Recession, shopping for the best rate on deposit accounts was common, but when deposit rates dipped and remained near rock bottom for years, many consumers decided comparing rates wasn’t worth their time, put their money in a safe place, and became complacent, Stanley says.

In prerecession times, a $1 million nest egg might have produced $80,000 to $90,000 annually in interest compared to the current $10,000. “Many people who thought they had a nice nest egg have been forced to begin redeeming the principal,” he says. “As rates start to rise, will people start to take notice? Maybe they’ll decide it’s worth their time and energy to begin comparing rates again.” To capture the attention of those consumers, he suggests “dollar-izing” the offer (spelling out the actual return members will earn, such as the interest to be paid on a one-year CD, in dollars and cents) to make it more relevant and transparent.

CUs also can encourage members to “refinance their CDs” currently held with other financial institutions. Refinancing loans as rates decline is common, but the idea of refinancing assets as rates rise is likely novel for many. A blanket offer to pay early withdrawal penalties might get expensive, but your CU could calculate the higher return on certificates with higher rates to show members that they could cover the costs of those tax-deductible penalties and still earn more by “trading up,” Stanley notes.

Other key strategies:

Make sure all time deposits automatically renew at standard rates, not special introductory rates.

In a rising rate environment, consider strengthening early withdrawal penalties to maintain the business you’ve brought in with rate specials.

Give members several options in the loan and savings rate structure.

“The typical approach of lenders is to keep it simple, and I appreciate that,” Stanley says. “But the more we learn about the psychology of pricing, we discover that choice is essential to produce confidence. If you give members three choices, each of which has merit—such as a loan with a fixed rate, a variable rate tied to treasury notes, or a variable rate tied to the credit union’s internal index with a ceiling—that engages members to use their power of choice. And when they exercise that choice, they satisfy their need to shop and deepen their relationship and buy-in with the credit union.”

Karen Bankston is the proprietress of Precision Prose and a longtime credit union writer.

the icing on the cake
Charlene Komar Storey
Charlene Komar Storey

red, white and blue cupcakesIt’s the ice cream on the apple pie, the Bearnaise sauce on the steak, the clotted cream on the scone–the added feature that takes something excellent and clinches its place at the very top of the scale.

When it comes to convincing policy makers of credit unions’ value, that extra element is data.

The basic ingredient of a credit union’s attraction remains a bit more ephemeral. It may be a personal relationship with the credit union cause, the appeal of more reasonable consumer costs than banks offer, or political reasons. Perhaps most often, it’s an individual credit union member’s story that reaches deep feelings.

“There’s nothing more powerful than member testimonials,” says CUES member David L. Tuyo II, CCE, CUDE, DBA, EVP/chief financial officer at $533 million Power Financial Credit Union, Pembroke Pines, Fla.

But when you deal with lawmakers and officials today, a story alone is not quite enough.

“The emotional strategy we’ve been using for the last 50 years–not to take anything away from it, but sometimes politicians get tired of hearing the same things, and there’s always a counter-party. Using data helps move the conversation along,” says Tuyo. “Data is concrete. You really need to focus on letting your emotions lose and your mind win.”

Ryan Donovan, Washington-based chief advocacy officer for the Credit Union National Association, points out, “Data contributes to every part of our advocacy efforts.”

Numbers provide the infrastructure for lobbying efforts today. That’s a fact of life at the level of broad credit-union efforts. And local programs that aim at success not only should incorporate data, but they can do so with more ease than ever before.

“It’s important to work with legislators to make sure they have a belief in the credit union cause—they need data to support their support,” says Center for Credit Union Board Excellence member Carroll Beach, immediate past chairman of $1.5 billion Elevations Credit Union, Boulder, Colo., and a long-time credit union professional, volunteer and advocate.

Leveraging Location

Donovan points to CUNA’s Project Zip Code as a prime part of its advocacy efforts.

Project Zip Code counts a credit union’s members and matches them by congressional district, state legislative district and county. The numbers–not members’ names–are uploaded to the Project Zip Code website and combined with data from credit unions across the U.S.

Lawmakers relate to their own districts and how local people are thinking, Beach points out, so making the greatest possible use of the program just makes good sense.

“Pure, raw data is not enough,” he says. “You can convince them that it’s a good cause and good public policy to support credit unions when they know the number of members in their district that own these institutions–that are serving each other.”

Data on the number of volunteers working at credit unions, and how credit union staff volunteer in the community, also influences lawmakers.

“The number of members in their districts is important to legislators,” Donovan echoes. “It helps make the impact of our data real.”

Beyond Project Zip Code, CUNA uses call report data in two important ways: in the aggregate, and also for specific states.

Descriptive Data

Staff Data

Credit unions’ lobbying emphasis, and rightly so, has always been on gathering data to present to decision-makers and, to a somewhat lesser extent, gathering data about those decision-makers. 

Elevations Credit Union Immediate Past Chairman Carroll Beach argues that there should be more data collected about legislators and regulators—and their staffs. A database should include how often each particular staff member has been contacted, not just a general “so-and-so’s office.”

“We need to know their thought patterns, feelings and stands,” he says. If credit unions have access to that data and utilize it, they can tailor their approach to each individual.

It’s staff members who often provide legislators with the expertise they need on the plethora of issues they must digest. “Staff has a tremendous amount of influence,” Beach says. “It’s good to have data on staff.”

That means making both general and CU-specific notes about staff members. What are their overall political philosophies? Where did they go to school? Do they have any relationship with the credit union movement in your area Have other CUs lobbied them, and do they have other information on them? Did they work for other legislators in the past? Did they handle credit union issues in that position?

Also, consider the upcoming elections. Is the staffer’s boss up for re-election in November? Did the boss win handily last time, or just barely win the seat? Are they considered a leader in Congress? Does the staffer handle other constituencies that may be supportive of credit union issues, too? 

In fact, Beach suggests, credit unions should treat staff members about the same as they do the decision-makers themselves.

“It’s important to have personal contacts,” Beach says. And that doesn’t mean only when you want something. “Have them visit the credit union—invite them to events. If the staff is on your side, you’re 90 percent there.”


Using a variety of data sources allows the association to present decision-makers with various scenarios, says Mike Schenk, CUNA senior economist.

“We can show them the beneficial impact legislation can have on constituents’ lives, for example, by demonstrating how many new jobs would likely be created by expanding credit union business lending,” Schenk explains.

Of course, numbers are more eye-popping in some districts than in others, Schenk points out. But generally speaking, data provides something solid to back up assertions of credit unions’ value.

Data provides value in conjunction with movement-wide issues. For instance, when the National Credit Union Administration raised the possibility that the risk-based capital ratio would be increased to 10.4 percent for all complex credit unions, CUNA used data to get a handle on what the effects would be.

“That helped not just with comment letters to NCUA, but also letters to members of Congress,” Donovan says, noting that CUNA spends a lot of time generating data to fight banks’ attempts to attack credit unions’ tax-exempt status.

Surveying the Landscape

It’s valuable to be able to illustrate the relative size of both the bank and credit union markets in a number of ways, Schenk says. That ranges from being able to cite the fact that the country has four banks that are each larger than the entire credit union sector, to showing, with a few figures, that the banking industry overall is 13 times the size of the CU movement.

“We’re specks on a fly on an elephant in the financial services market,” says Tuyo.

Sketching that statistical picture to legislators makes it hard for them to take seriously banks’ claims that CUs threaten them.

“We have to be able to show the holes in their arguments,” Tuyo says.

Schenk adds that CUNA also emphasizes the issue of structure. A third of all banks in the United States–totaling $600 billion in assets—are Subchapter S corporations, which allows them substantial tax benefits.

Measuring CUs’ Worth

The association also uses data to show how CUs help consumers. In 2014, CUs returned $8 billion to members—the figures add up to $100 billion over the last 10 years—in the form of lower interest rates and fees.

Moreover, CUNA can drill down to the state level, and even to the impact of individual credit unions, providing an uncomplicated way for the issue to be viewed in sharper focus at regional and local levels.

“We make the credit union difference crystal-clear. We make it clear to policy makers that we’re not squandering the tax exemption—we’re helping members,” Schenk says.

Further, by using research, CUNA can show government decision-makers that even bank customers gain when banks compete with credit unions, because the competition keeps bank deposit rates higher and loan interest rates and fees lower than they would be without a credit union presence in the market.

“We can provide data on the savings credit unions bring to the community, and what would be the effect on consumers if there were no credit unions,” Beach says.

And any time politicians can say they have saved their constituents money, they’re happy, he adds.

CUNA does this through research. Perhaps the most significant econometric-driven argument credit unions can make today concerns their record during recessions.

“Credit unions significantly outperform during periods of recession. When you look at financial performance, credit unions can have a disproportionate influence during downturns,” says Tuyo, whose doctoral thesis included a review of these studies. “If you have a section of the financial industry that can be a natural curb to an economic downturn, why would you not incentivize it?”

The Great Recession and the slow recovery the U.S. is still experiencing have been no exceptions. During this period, Schenk says, bank lending has been extremely weak, but credit unions have stayed in the game.

“We see strong rates of credit union loan growth across the board,” Schenk says.

Beach adds that credit unions have also helped fill the void in small business loans as banks get bigger and credit gets tighter. “We did not ask the government for bailout funds,” he emphasizes.

These are among the arguments CUNA is using as the push for expanded business lending powers continues. It also uses outside numbers, such as those produced by a Small Business Administration study that show about 80 percent of all business loans credit unions make would not have been made by banks.

Tell the Story Now

It’s especially important–and challenging–to get U.S. credit unions’ message out this year. A presidential election means more people will pay attention to the issues and come out to vote. It’s easy to focus too much on the change of president, but it’s important not to forget that all 435 House seats will be up for grabs, as well as 34 Senate seats and 12 governorships, as well as many other positions.

Making the case for credit unions is the same with candidates as with potential members, Tuyo points out: You have to win them over by proving credit unions are different from banks. 

Beach adds that underscoring overall historical data can be beneficial. Telling the story of the growth and service of credit unions over the years–how CUs introduced many benefits, such as interest on checking accounts–shows how credit unions always have members in mind.

Data on credit unions’ ability to serve everyone, and serve them economically, is key, Beach says. He adds that providing data segmentation to show diversity in membership is another way to illustrate the credit union difference, and to push back banks’ attacks. Such segmentation, Beach says, can prove credit unions don’t just serve “A” borrowers.

“We serve people who could not get a competitive loan at other institutions,” he says. Data from low-income credit unions will also show that credit unions loan in poorer areas, Beach adds.

And data on how CUs educate members about everything from basic financial information to enterprise management also impresses legislators.

Additionally, Beach supports gathering specific data on what complying with given regulations costs. “Some may be worth it, but some may not,” he points out.

Beach would like to see all data, and especially econometrics, gathered in one place and more generally available throughout the credit union family.

“The philosophy, cause, purpose and core values of credit unions should mesh with data in the minds of decision-makers,” he says.

Charlene Komar Storey is a veteran credit union writer based in New Jersey.

cybersecurity assessment tool
Jim Benlein, CISA, CISM, CRISC
Jim Benlein, CISA, CISM, CRISC

lock on internet streamWith the release of its Cybersecurity Assessment Tool in June 2015, the Federal Financial Institutions Examination Council looked to provide banks and credit unions with means to examine and assess their level of security and risk to cyberthreats. Completed assessments would be another “tool” in the financial institution’s belt for controlling security risks.

The CAT’s first section (inherent risk) provides guidance on what to consider and how to view “inherent” or “raw” risk. Inherent/raw risk is the level existing without the application of controls. It is the starting point for your risk analysis. Using the information and listed items in the CAT, your credit union can get an idea of its risk picture when deploying various technology systems, products and services before security measures and controls are put into place.

Using these categories and ratings can be useful to your credit union in examining the potential change in risks you face when looking to add or change technology products and services. For example, imagine that your credit union is thinking of adding person-to-person payments to its portfolio of products. Looking through the inherent risk table provides some insight into the level (or change) of risk in doing this.

The second section (maturity) builds on Carnegie Mellon University’s Capability Maturity Model Integration framework for examining and improving process efficiency and effectiveness. For credit unions, these maturity items provide insight into how well cybersecurity is being handled currently (how mature it is), and how improvements can be made. For the maturity section, it is important to remember you can’t move up a level unless all the items in the prior levels are being done.

The focus areas within the CAT’s maturity section (cyber-risk management and oversight, threat intelligence and collaboration, cybersecurity controls, external dependency management, cyberincident management and resilience) are useful in grouping together cybersecurity concerns at a high level. Think of these focus areas as key sections in your information/cybersecurity strategy documents. For example, based on this, you might ask, “What is our credit union’s cyber-risk management and oversight strategy going to be?”

It is important to see CAT not as an end, but rather a means to an end. “We copied and pasted the CAT items into a checklist and were able to check off many of the items – so we’re doing fine!” is not the statement your board of directors needs to hear on how your credit union manages cybersecurity risks.

While the tool provides insight into the inherent risk in using various technologies—helpful as you begin your risk assessment—it does not examine how the risk levels or changes in the levels fit into the credit union’s enterprise risk profile. For example, deciding to add mobile banking increases the delivery channels (mobile presence) risk. But, deciding not to add mobile banking can be riskier overall for the credit union if it has an impact on member growth and retention objectives.

It is also important to understand the pronounced inherent risk levels may have been appropriate when the documentation was finalized last June, but there is no cause to assume they will stay at those levels over time. They may increase or decrease.

In developing the tool, FFIEC needed to cover very large financial institutions. So in many cases, the example numbers or values (20 or more, >1,000, 501 – 1,500, etc.) listed for various items are much larger or higher than the average credit union has or will grow into. However, this doesn’t mean your credit union will never have or grow into those levels of risk. Your credit union should not use the numbers as hard and fast lines-in-the-sand to judge your inherent risk level (or when you bump up to the next level). Instead, look at the numbers as representative examples, and consider them in relationship to your asset size, number of employees, support staff, and control environment.

As noted earlier, the maturity section offers insights into actions your credit union can take to enhance its cybersecurity posture, helping to address the question, “What more can we do?” In reviewing the various items, your credit union should consider where it is at and what level of maturity best meets enterprise objectives for cybersecurity and risk management. Your credit union may decide an intermediate (Level 3) or advanced (Level 4) maturity level best serves the credit union and its members: The costs of moving to a higher level may outweigh any benefits.

Your credit union should also understand that maturity level items, similar to inherent risk levels, work on a bit of a sliding scale. What is considered an “evolving” item this year may become a “baseline” item next year. Additionally, doing that “item” doesn’t mean the “item” is being done well.

While questions have been raised on the true effectiveness of the CAT and the degree to which it aids credit unions in improving their cybersecurity posture, it does provide important information your credit union can use to understand cybersecurity risks, and options for improving and strengthening your ability to keep those risks at acceptable levels.

Jim Benlein, CISA, CISM, CRISC, owns KGS Consulting, LLC, Silverdale, Wash., and offers insights to CUs on information technology governance, information security, and technology risk management.

If your credit union is looking for additional insights into process maturity, Benlein recommends Carnegie Mellon’s CMMI Institute and the Information Systems Audit and Control Association.

retirement plans the cobblers children have no shoes
Tom Eckert
Tom Eckert

jar of moneyIs your credit union so busy helping members improve their financial futures that you’re missing opportunities to help your employees do the same? It’s all too easy for that to happen, as with the proverbial cobbler whose children have no shoes.

This year, take some simple steps to help your employees use their retirement plans more effectively. This is especially important for employees with gender and generational demographics that are at high risk for retirement income shortfalls.

Women: Falling Short

Sixty percent of women surveyed for a 2015 Filene Research Institute report said they had never taken steps to determine what they need to put away for retirement. This should be of special concern to the CU industry. CUNA Mutual Group estimates about three quarters of CU employees are women.

Failing to calculate adequate retirement savings is just one example of how women struggle to build an adequate nest egg (see box, p. 33). As a result, women have larger projected retirement savings shortfalls than men—as research from the Employee Benefits Research Institute shows. EBRI’s Retirement Savings Shortfall predicts how much more individuals and households still need to save by age 65 to avoid projected income deficits in retirement. EBRI estimated that the RSS for early baby boomers on the verge of retirement is an average of $33,778 for single men and $62,734 for single women. For married couples, the RSS is just under $40,000.

Maybe that doesn’t seem like a lot of catching up to do. But those averages include early boomers projected to have enough money for retirement along with those projected to run out. If we just look at the 42 percent of early boomers who are projected to run out of money after they retire, the RSS jumps to $93,576 for single males and $104,821 for single females, with married households averaging about $142,000.

Gen X: Retirement Plans on Hold

The RSS for Gen X, people born from the early ’60s to the early ’80s, is even higher than for baby boomers. For those projected to have an income deficit in retirement, the RSS is $129,861 for single men, $133,790 for single women, and more than $164,000 for married households.

The EBRI report indicates the reason Gen X RSS values are so much higher than those of baby boomers is the assumption that health care-related costs will increase faster than the general inflation rate.

Gen Xers seem well aware of their poor outlook for retirement, according to Northwestern Mutual’s “Planning and Progress 2015” report— which surveyed 5,000 U.S. adults spanning four generations.

Some of the troubling statistics include:

  • 37 percent of Gen Xers said they don’t “at all feel financially secure.” This was the highest percentage of any of the generations to feel this financially insecure.
  • 66 percent of Gen X respondents expect to work past traditional retirement age out of necessity. Almost two in 10 believe they’ll never retire.
The Retirement Income Gender Gap
The Filene Research Institute’s 2015 report, “The Gender Gap: Troubling Financial Capability Findings Among Women” (, highlights the factors that can create significant retirement savings shortfalls for women. Among the report’s key findings:
Retirement gap. Even among women aged 51-61, only two-thirds report that they (or their spouse) have a retirement account.
Costly college. More women than men are earning bachelor’s degrees, but that advance also means women are more likely than men to carry education debt.
The card trap. Women are more likely than men to make only the minimum payment on their credit cards and to be charged late fees. 
No umbrellas. Only 31 percent of women say they have sufficient funds to cover expenses for three months in the event of sickness, job loss or another emergency.

The Retirement Income Gender Gap

The Filene Research Institute’s 2015 report, “The Gender Gap: Troubling Financial Capability Findings Among Women”, highlights the factors that can create significant retirement savings shortfalls for women. Among the report’s key findings:

  • Retirement gap. Even among women aged 51-61, only two-thirds report that they (or their spouse) have a retirement account.
  • Costly college. More women than men are earning bachelor’s degrees, but that advance also means women are more likely than men to carry education debt.
  • The card trap. Women are more likely than men to make only the minimum payment on their credit cards and to be charged late fees. 
  • No umbrellas. Only 31 percent of women say they have sufficient funds to cover expenses for three months in the event of sickness, job loss or another emergency.

The Difference a Defined Contribution Benefit Makes

The EBRI report uses Gen X as an example of how important a defined contribution benefit plan, such as a 401(k), is to the retirement income outlook.

The RSS for Gen Xers without access to a defined contribution plan is $78,297. Again, this means these Gen Xers will be nearly $80,000 short of the retirement savings they’d need at age 65 to retire without running out of money before they die.

But that shortfall drops substantially to $52,113 for Gen Xers who have one to nine years of eligibility for a defined contribution retirement plan. Those who have 10 to 19 years of eligibility remaining have a projected shortfall of $32,937, and those who have 20 or more years of eligibility would have a shortfall of only $16,782.

Get the Most Out of Your Employee Retirement Plan

You can dismiss all these statistics and tell yourself that your credit union’s employees are in much better shape than the national averages reflected in this broad survey data.

It would be easy, for example, to single out the EBRI data showing the advantages of having access to a defined contribution plan, and reason that if your credit union offers a 401(k), you’ve given your employees what they need to save enough for retirement.

But as an institution dedicated to financial security, shouldn’t you go beyond that basic measure?

Here are some key steps you can take to make your defined contribution plan more likely to provide your employees with the savings they need for a financially sound retirement:

1. Set up defaults to facilitate adequate retirement savings. Make sure employees who take a hands-off approach to retirement savings—and you may be shocked to learn how many of your employees fall into this category—are still contributing enough to their plan. Consider these defaults:

  • Automatic enrollment: According to the Aon Hewitt 2015 Universe Benchmarks report, which analyzes the retirement savings behavior for 3.5 million employees, participation in defined contribution plans with automatic enrollment was 86 percent. In contrast, participation in plans without automatic enrollment was 61 percent.
  • Automatic deferral escalation with a stretched matching contribution: Employees tend to contribute the percentage employers will match. So stretch your match. For example, rather than matching dollar for dollar up to 3 percent, match 50 cents on the dollar up to 6 percent. Then automatically increase the deferral by 1 percent per year up to 10 percent or higher. Through a combination of default deferral, automatic increases and employer match, your goal for employees is to target an 80 percent income replacement ratio.
  • Use target date funds as your plan’s Qualified Default Investment Alternative. TDFs give your employees automatic access to long-term professional management of their investment.

2. Provide personalized guidance. Your typical employees may check the online account summary page of their 401(k) account once per quarter, if that. So when they do, they need to see certain key information at a glance, such as:

  • On track or not on track to generate enough retirement income: Do this with a simple, prominent yes or no on track, combined with a graphic illustration of the savings arc participants are on—and the arc they need to be on to meet their goal. Express the goal as a percentage of the employee’s current income they should be replacing in retirement.
  • The target retirement age: Set the default so the employee qualifies for full Social Security retirement benefits.
  • Projected account balance: The projected amount should be more prominent than the current amount.
  • Monthly income at retirement: The balance should be expressed as a monthly income based on a reasonable assumption of the annuitized value, as opposed to a lump sum of total savings.
  • Current employee and employer contribution percentages.
  • Current account balance: Make this less prominent than projected account balance.

3. Measure results. Measuring participation rates in employee retirement plans isn’t enough to be sure you’re getting the most from your investment in the plan. You should also be tracking:

  • Average deferral rate: If deferral rates are clustered around your default rate—and on average employees still aren’t on track to meet adequate retirement income targets—your default deferral may be too low. Consider implementing an automatic escalation if you don’t have one.
  • Forecasted income replacement ratio: How many of your participants are on track to replace 80 percent of their projected peak income in retirement? Knowing who and how many aren’t on target for a financially secure retirement can be used to create targeted education to help at-risk individuals.
  • Optimal allocation among major asset classes: Look for participants who appear to have all their eggs in one (overly risky) basket.

Don’t Make This Assumption

It isn’t fair to assume your employees have a better handle on retirement planning because they work for a CU. It’s more important to adopt a culture of taking good care of the folks who take care of your members.

Employees who are on track for a comfortable retirement have one less source of stress, which is certainly positive for their sense of job satisfaction and ability to serve members.

Tom Eckert is vice president of CUNA Mutual Retirement Solutions, a subsidiary of CUNA Mutual Group, Madison, Wis., a CUES Supplier member and strategic partner. For more information, contact him at 800.356.2644, ext. 665.7032.

prepare for video and televised interviews
Mallory Griffin
Mallory Griffin

video interviewWith a successful public relations strategy, credit unions can develop meaningful content through news and feature stories on a wide variety of platforms, including TV and video. Participating in a televised interview gives credit unions the opportunity to engage a broader audience than traditional print interviews and provide consumers with relevant information regarding their finances.

A unique medium, video interviews require a different level of preparation than interviews for print publications. When appearing on video, credit unions and their selected spokesperson must understand that appearance, tone and timing are crucial elements of the interview. Whether the interview is taped on site, live and in person or live via satellite, remembering these five tips will ensure a smooth, successful piece that will establish credibility for the credit union.

1)  Be mindful of your messaging – Know why you’re doing the interview and what you want to accomplish during that interview. Whether the interview lasts one minute or half an hour, it is critical that you are clear about the subject matter and think carefully about how the messages are being conveyed. In addition, understanding the program’s audience will help you tailor your message accordingly. For instance, if the majority of viewers are primarily younger millennials, discussing strategies for retirement planning may not resonate strongly.

2)  Have your first answer prepared – By knowing what you will be asked first, you can have an eloquent answer ready and start the interview on a good note, which can help build confidence. Preparing anecdotes and clever phrases will help you explain key points in an engaging way; however, it’s important to note that memorizing answers should be avoided. Overly scripted answers often sound unnatural and are useless if the interviewer asks a different question or requests additional information.

3)  Concise answers make better sound bites – Incorporating the interviewer’s question into your response will help strengthen your answer and keep you on track, while making an excellent sound bite. Also, remember to slow down, as it’s easy to speak faster than usual on camera; and avoid jargon and acronyms, which can make it difficult for viewers to understand your message.

4)  Don’t let your appearance outshine your expertise – Wear clothing that is comfortable and conservative, and steer clear of busy patterns, such as stripes or checked fabrics. Leave eye-catching accessories at home because they can be distracting; simple, understated jewelry is enough. Solid white should also be avoided, as it often appears harshly vivid on camera. Solid, complimentary tones, like dark blues and greens, are ideal. Also, remember to blink and hydrate; both of which are easy to forget but will help you look and feel your best. 

5)  Lastly, be comfortable and confident – Think clearly, act natural and display confidence. During the interview, relax and remember to breathe before you speak. Remaining calm and taking the time to think about your responses will help you make the most of this opportunity.

Ultimately, you’re the expert, so let it show. By remembering the aforementioned tips, you will appear confident, dynamic and professional, which will help captivate the audience with your message. 

Video interviews are valuable opportunities that empower credit unions to raise their public profile and reach a larger audience of existing and potential members. It’s also important to remember that a dedicated team of media experts can help your credit union leverage such opportunities by ensuring thorough preparation for the interview and getting the most mileage possible from the resulting coverage.

Mallory Griffin is an account coordinator at William Mills Agency, the nation’s largest independent public relations firm focusing exclusively on the financial services and technology industries. The agency can be followed on Twitter, Facebook, LinkedIn, or its blog.

CUES’ Credit Union Management’s online-only “PR Insight” column runs the first Thursday of every month.

better regulator discussions
Stephen A.J. Eisenberg
Stephen A.J. Eisenberg

businessmen walking and talkingWhen it comes to talking with your examiner from the National Credit Union Administration, you don’t want to end up quoting this line from the 1967 movie, “Cool Hand Luke”: “What we’ve got here is failure to communicate!” Indeed, establishing a strong, effective dialog with the regulator over time will be beneficial to your credit union and its membership.

So, let’s take a few moments to talk about how to make talking with your NCUA representative a truly successful undertaking. 

Let’s be honest! Dealing with a regulator is not one iota different from collaborating with anyone else where there is a need to achieve conclusions that meet the desires of the parties. There is no magic! People are people; it’s all a matter of good human relations.

Keeping that in mind, a good place to start your efforts to have a great dialog with your regulator is to be sensitive to the circumstances surrounding a particular conversation, as it will prepare you to be focused to communicate in an effective way.

For example, when an examination is in progress, material discussion of the items under examination is likely. It’s possible that some disagreement may exist. A credit union may also be talking to its regulator with the purpose of gaining approval for a particular initiative (say a field of membership expansion), to update NCUA about ongoing operations, or to plant a seed about a future undertaking. Going in with your purpose in mind will help you get your point across.

The second rule in dealing with a regulator is: Place yourself in their shoes. Think hard about where the regulator is coming from; understand their need and what they are trying to accomplish. You want the regulator as well as yourself to be comfortable with the outcome.

Third, be sure to apply smart interpersonal communication skills. This most certainly does not mean “sucking up” to the regulator. It does mean being your genuine self in dealing with her or him. Try the following:

Listen to what the regulator is saying. Be engaged in what the regulator is telling you. Don’t be so focused on your point of view that you have shut out the “other side of the story”!

  • Display body language that conveys that you are involved and considering, not rejecting, the points made by the regulator, and that you are open to the position and/or points being raised.
  • Provide feedback to the regulator that is unemotional, reasonable and thoughtfully addresses the issue being confronted or that moves the credit union in the direction that it wishes to achieve.
  • Control your emotions. Advance the thoughts or views supporting the institution’s position in the matter calmly and rationally.

The final obligation in dealing with the regulator is to be mindful of Yogi Berra’s admonition, “It ain’t over till it’s over”!

No matter what type of meeting you are in with NCUA, the outcome is never final! There is always a route to having the outcome reviewed. When you have to revisit an issue, rest assured that a more thoughtful approach will result—from both sides. That is, you will produce a documented statement of position or desire and that will be considered in a different light from before.

At bottom, be aware of four thoughts in meetings with the regulator. Be sensitive to the situation in which the conversation will be conducted, and what issues are to be discussed. Know that the regulator is no different than you; he or she is a human being who will conduct himself/herself with the same feelings and reactions as you. Understand where the regulator is coming from; what their wants and needs are. And, recognize that no matter the outcome, there is always an avenue of recourse.

Regrettably, no matter how hard one attempts to communicate, sometimes it’s impossible to get your point across and find middle ground. In short, the parties' views are “ships passing in the night’! At this point, it merits stepping back. It may merit bringing in a third party to facilitate breaking open the dialog anew.

Playwright George Bernard Shaw is known for saying that “The single biggest problem in communication is the illusion that it has taken place.” If you follow the steps outlined in this article, you’ll be well on your way to ensuring that your communication with your credit union’s regulator is not only real, but effective.

Stephen A.J. Eisenberg is of counsel with CU Counsel, PLLC, Washington, D.C.

read to lead
Laurie Maddalena, MBA, CPCC, PHR
Laurie Maddalena, MBA, CPCC, PHR

books and coffee"Not all readers are leaders, but all leaders are readers."  ~Harry Truman

When was the last time you saw a positive and uplifting story on the news or the Internet? Our news media are saturated with negative stories and messages. While it's good to be informed about current events, as leaders it serves us to feed our minds with positive information and stories so we can inspire and empower our teams.

Not only is reading a way to improve our intelligence, generate ideas, and inspire innovation, it can also reduce stress. One study showed that reading for just six minutes reduced stress by 68 percent.

Many of the most successful business leaders are readers. Steve Jobs was an avid reader of William Blake; Warren Buffet spends up to 80 percent of his time reading or thinking; and Elon Musk is reported to have read two books a day as a child.

Bottom line: Reading can make you a better leader. Exceptional leaders are always looking to improve their skills and become more effective.

John Coleman, author of the Harvard Business Review article, "For Those Who Want to Lead, Read," suggests reading material in different genres, not just leadership or business books. He notes many business professionals claim reading across fields is good for creativity and innovation.

I occasionally read historical books by David McCullough and historical fiction. Mostly, I gravitate to leadership and personal development books. If you are looking to add some books to your reading list, here are my five favorite leadership and personal development books:

1)         The Advantage by Patrick Lencioni illustrates why organizational health is more important than other variables like strategy, marketing, and finance. An organization that is smart, but not healthy, will not be successful. Lencioni shares four disciplines that must be done all at once and maintained on an ongoing basis to be preserved. The four disciplines are:

  1. Build a cohesive leadership team.
  2. Create clarity.
  3. Overcommunicate clarity.
  4. Reinforce clarity.

This brilliant book illustrates how these four disciplines overcome organizational issues like dysfunction, politics and confusion. This book is a must-read for leaders, particularly executives.

2)         Essentialism: The Disciplined Pursuit of Less by Greg McKeown is a book I recently read, and I couldn't put it down. Not just because of the author's compelling stories, but because I was craving more simplicity in my life. McKeown shares a systematic discipline for deciding what is absolutely essential, then eliminating everything that is not, so we can make the highest possible contribution toward the things that really matter. This is not a book about time management, it is a book about life management. If you are craving more space, time, and better results in your life, this book will help you get there.

3)         The Success Principles: How to Get From Where You Are to Where You Want to Be by Jack Canfield isn't just a book about professional success; it's a book about life success. Canfield shares 67 principles that will propel you to success. That may seem like a lot of principles, but some of them are so simple, it's a matter of making a decision and sticking to it. Whether you want to become more clear about your purpose in life, achieve greater levels of success, become a better leader, increase your confidence, or become a better parent, this book will transform your life. I felt so motivated and inspired by this book, that I signed up for Jack's training on how to teach these principles.

4)         Leadership From the Inside Out: Becoming a Leader for Life by Kevin Cashman is my favorite leadership book of all time. If every leader read this book, we would have a world of exceptional leaders! What I like most is that every chapter has exercises and reflections to help put the concepts into practice. This book isn't about fixing weaknesses or just implementing a few strategies like many other books. Cashman guides the reader through a journey to grow as a whole person in order to grow as a whole leader. His model focuses on mastery in the following areas: personal, purpose, change, interpersonal, being, resilience and action. It's refreshing, inspirational and backed by research. If you read one leadership book this year, let this be the one!

5)         The One Thing: The Surprisingly Simple Truth Behind Extraordinary Results by Gary Keller provides tools for increased productivity, less stress, and better results in less time. Keller shares the lies that mislead and derail us and then provides tools for clearing the clutter and focusing. One of my favorite nuggets from this book is the focusing question, which is the simple formula to finding exceptional answers that lead to extraordinary results. The focusing question is: "What's the one thing I can do such by doing it everything else will be easier or unnecessary?" This question can be applied to all areas of your life. This book is another inspiring read on how to cut through all the distractions and lead a high quality life.

What is one of your favorite leadership books? Please share in the comments!

Laurie Maddalena, MBA, CPCC, PHR, is a certified executive coach, leadership consultant and founder of Envision Excellence, LLC in the Washington, D.C., area. Her mission is to create exceptional cultures by teaching leaders how to be exceptional. Maddalena facilitates management and executive training programs and team-building sessions and speaks at leadership events. Prior to starting her business, she was an HR executive at a $450 million credit union. Contact her at 240.605.7940 or

management network march 2016
Mobile Branch Does Triple Duty


Mobile Branch Does Triple Duty

Innovation Credit Union’s new service center is equipped with all the latest technology—and has the added advantage of having no fixed address. Instead, the “mobile advice center” will travel throughout western Saskatchewan serving members at fairs and other special events and in small communities without a permanent branch.

The mobile unit is expected to enhance member service, double as a movable marketing vehicle—if you’ll pardon the pun—and even round out disaster recovery response, says CUES member Daniel Johnson, CEO of the $2.6 billion CU serving 48,000 members.

“A big part of this venture is to demonstrate to members and staff that banking doesn’t have to happen in a branch,” Johnson says.

The 40-by-8-foot unit is equipped with video ATMs and computers with 55-inch touchscreens to let existing and prospective members perform a full range of transactions while interacting with financial service representatives at Innovation CU’s contact center or one of its 22 branches, says Chief Digital Officer Dean Gagne. Employees staffing the unit will also guide members through mobile access options on their smartphones or demonstrate with CU-supplied tablets and phones.

Innovation CU planned to roll out its mobile branch—the first such unit owned by a Canadian credit union—at its annual general meeting this spring. The Freightliner vehicle, adapted by Mobile Facilities, LLC, is equipped with 3G/4G LTE technology for wireless connectivity, an electrical generator, and satellite GPS tracking. Even though the mobile branch is about one-third the cost per square foot of building a stationary branch, the mobile unit will serve a much wider area, Gagne notes.

Marketers and member service staff have generated lots of ideas for using the mobile unit to maximum effect—like pulling up outside a coffee shop for a “FreeStyle Friday” to buy patrons a cup of coffee, describe Innovation CU’s FreeStyle no-fee checking account, and demonstrate easy access by transferring $5 into their new accounts. Another possibility is stopping by member-owned businesses to give employees an opportunity to enroll.

“We want to engage our entire organization in outreach” by inviting employees at local branches to staff the mobile unit when it’s in their area, says Gagne, a CUES member. “Everywhere it goes, Innovation’s brand is promoted—not just our name but the brand of innovation.”

Check Fraud Still on Radar

Even as check volume continues to decline, fraud committed via this form of payment “remains a significant risk for the foreseeable future,” according to a recent whitepaper on “Cheating With Checks” from Bluepoint Solutions, a CUES Supplier member.

The most common forms of check fraud involve counterfeit checks and return deposited items, indicating the need for continued employee and member education. The latter includes scams in which members receive a check or cashier’s check involving an offer instructing them to return some of the money via Western Union or another form of wire transfer. After the transfer is completed, the check is found to be fake.

The Bluepoint report also advises continuing vigilance in monitoring checks submitted via mobile deposit apps as this channel becomes more commonplace. Thus far, “the actual losses due to mobile payment fraud are not yet large,” the report notes. “However, when the rate of change is extremely rapid and apparently relentless, opportunities for fraud multiply and warrant close monitoring.”

The rise of mobile checking also increases the risk of “cross-channel fraud,” in which thieves move funds in and out of accounts without authorization, exploiting online and mobile access. “The migration of deposits from branches to mobile devices is rapidly multiplying the attractiveness of checks in the fraudscape,” the report concludes.   

Download the complete Bluepoint Solutions whitepaper.

setinstone credit limits are so 2015
Karan Bhalla
Karan Bhalla

speedometer holding a credit card scannerEvery credit card portfolio in the movement will be tested this year. Intense competition for cardholder business, changing consumer preferences and on-the-move interest rates are just a few of the trends already presenting cards teams with tough challenges, yet also unprecedented opportunity.

To position themselves for success in the evolving world of credit card issuance, savvy credit unions are looking more closely at cardholder data. Coupled with skillful analytics, data from a variety of internal and external sources allows cards managers to make quick decisions with confidence. The result is an intuitive program, one that adjusts to offer customized features, benefits and perks—often before members even know they want them.

Take credit lines, for example. Cardholders rarely consider asking their issuer to change what many of them perceive to be set-in-stone limits. Yet, when presented with even a modestly increased credit line, cardholder appreciation for the benefit becomes apparent.

This is particularly true among credit union cardholders. That’s because cooperatives are very often on the extreme end of conservatism when it comes to extending credit. Not only does this conservatism leave worthy borrowers completely off the credit union radar; it opens the door for aggressive competitors and financial technology lenders  to begin courting a credit union’s members. 

Seeing precisely that writing on the wall, the credit card team at $3.2 billion University of Iowa Community Credit Union, N. Liberty, Iowa, knew it had to make an aggressive move to continue offering members a valuable product. After engaging IQR Consulting through its relationship with card processor TMG, a CUES Supplier member based in Des Moines, Iowa, the 140,000-member cooperative set out to execute a two-year, data-driven credit line increase strategy.

University of Iowa Community CU’s leadership knew a cardholder’s balance almost always correlates to his or her credit limit. Credit users are often advised to keep their balances below 30 percent of their overall available credit, as in this article. If credit lines are unnecessarily restricted, it means lower potential revenues for the credit union. That said, revenue was not University of Iowa Community CU’s main focus.

The team had two core objectives: 1) demonstrate the credit union’s confidence in its cardholders; and 2) encourage member loyalty by offering a payment option they truly wanted to use.

Like most credit card optimization strategies, a credit line increase campaign will not be successful without repeat execution using updated data. A cardholder whose scores and behaviors trigger a low increase today may qualify for an additional increase down the road.

To-date, University of Iowa Community CU has conducted two, fairly similar credit line increase campaigns. Learnings from the 2014 campaign and updated data were used to recommend credit line increases in the second, conducted in early 2015.

In the first campaign, more than 10,000 credit card accounts were extended line increases based on risk profiles generated by data scientists, portfolio and compliance experts from IQR, TMG and University of Iowa Community CU. Stringent risk criteria excluded accounts for which a credit line increase would not be appropriate. “Ability to repay” calculations ensured all increases complied with CARD Act and Reg Z requirements.

Segmentation of University of Iowa Community CU’s portfolio, which relied on statistical models, ultimately determined the optimal credit line for each member. Each segment contained a test and a control group so the team could monitor the real outcomes of various increases.

In just 10 months, the 2014 credit line increases inspired $7.7 million in incremental credit card spend and $3.4 million growth in balances. By the time the team had fine-tuned the campaign and run it again in early 2015, profit per card per month was up by 12 percent, and the overall strategy had generated more than $29 million in incremental exposure.

Arguably best of all, the return came from a smaller investment, as marketing dollars were not wasted on uninterested or unqualified account holders.

Consistent monitoring of data and the capability to make decisions based on that data are increasingly important competencies for credit union card issuers. Credit line increase campaigns are just one of several optimization strategies that stand to benefit from the power of member intelligence this year and well into the future.

Karan Bhalla is managing director for IQR Consulting, Reston, Va., which helps business in several industries, from financial institutions to airlines, leverage data assets to increase profitability.

the 4 villains of decisionmaking
Joel Trammell
Joel Trammell

bad guy in dark suit in the darkDecisions are the fuel on which every organization runs. Even though we’re moving away from the old concept of leaders as “deciders” and employees as “doers,” the CEO still holds the key responsibility of making decisions that affect the entire group. This is one of his or her five responsibilities as chief executive.

Unfortunately, CEOs—like all humans—aren’t usually very good at making decisions.

In their book, Decisive: How to Make Better Choices in Life and Work, Chip and Dan Heath explore our collective decision-making weaknesses as human beings. They describe what they call the “four villains of decision making”—narrow framing, confirmation bias, short-term emotion, and overconfidence about the future.

I think these four villains map particularly well to the way most CEOs approach decisions. Let’s see what they look like in action, and how we can keep them from leading us and our companies astray.

Villain #1: Narrow Framing

Say a CEO is asked to make a decision about an acquisition. We encounter the first villain in how the question is posed: “Should we acquire credit union XYZ?” The decision has been framed very narrowly, often because it is reactive. Instead of asking, “What is the best way to invest a certain amount of money to expand our membership reach?” the question narrows the decision to a simple yes or no.

The CEO’s first responsibility in every decision-making process is to widen the scope of the decision and make sure it is framed as broadly as possible so the discussions get to the root of the real issue.

Villain #2: Confirmation Bias

Even if the question is properly framed, it is easy for people to search out only the information that confirms their preferred course of action. Confirmation bias happens every day in companies, from hiring decisions to large-scale strategy choices.

In mergers and acquisitions, I’ve seen companies assign huge teams of people to collect thousands of pages of information during their due diligence. The problem is that a large majority of that information turns out to not be relevant to the decision-making process. All it does is make people feel more certain of their positions.

The right approach might be to decide before you begin what assumptions need to be tested to gather specific proof in support of doing the deal and what factors, if discovered, would cause you not to do the deal. One team should test the assumptions while another team should be charged with uncovering reasons not to proceed.

Villain #3: Short-Term Emotion

Any time a lot of work is put into an effort, people will become emotionally invested in the decision. No one wants to do months of work only to decide not to move forward. The vast majority of CEOs are predisposed to action. So, when it comes down to making a decision, their default position will be to do something. The driving force of short-term emotion can cause bad decisions that have long-term implications.

Villain #4: Overconfidence About the Future

Finally, after a decision is made, we convince ourselves that we made the right decision regardless of any future data. In a study from KPMG regarding mergers and acquisitions, 82 percent of CEOs reported that a major acquisition each one had led was a success. When KPMG analyzed the objective data, they found that “83 percent of the mergers were unsuccessful in producing any business benefit as regards shareholder value.”

Talk about a disconnect between beliefs and reality. Not only do we make poor decisions; we also tend to deny it when we do. Therefore, it’s critical that leaders continue to look for objective data after a decision has been made to adjust to changing conditions as quickly as possible.

As CEO, it’s vital to be constantly on the lookout for these four villains of decision making. Look for examples from your own past, ask other credit union CEOs about their own good and bad decisions, or even look for the villains at work as you read The Wall Street Journal. Your work to stay vigilant of these biases will pay off in more informed, effective decisions about the business.

Joel Trammel is CEO of Khorus. Download his free e-book, 15 CEO Best Practices for Exceptional Results to get his take on how to succeed in this challenging, one-of-a-kind role.

keeping the right focus
Diane Franklin
Diane Franklin

Frank BrancaFocus on the member, first and foremost. That has been Frank Branca’s guiding principle throughout his 14-year tenure on the board of directors for Digital Federal Credit Union, based in Marlborough, Mass.

“Certainly the board and the management team do everything we possibly can to help our half-million members,” says Branca, a CUES Director member whose board belongs to CUES’ Center for Credit Union
Board Excellence
. “Everything we do is geared toward our members and making sure we provide them with a full spectrum of services and opportunities that will allow them to be successful.”

By focusing on its members’ success, DCU has become successful as well. Its asset size stands at $6.4 billion, making it the largest CU in New England and one of the top 20 CUs in the United States. Much of that growth occurred during the 10-year period when Branca was chair, when assets grew 173 percent and membership, 127 percent.

Because of his strong commitment to serving the credit union and its members, Branca was named 2015 CUES Distinguished Director. He accepted the award at CUES’ Directors Conference, which took place in December in Florida.

“The board as well as the entire organization were extremely pleased to see Frank’s selfless contributions to DCU recognized on a national level with his receipt of this prestigious honor,” says Jim Regan, president/CEO. “He has been incredibly generous with his time and talents, and we’re extremely fortunate that he chose to serve the credit union as he has.”

A Long Record of Service

Branca first became involved with DCU board-related activities about 16 years ago, when he joined the supervisory committee, later serving as secretary and then chairman. In 2002, he was approached to fill an opening on the board. He became chair two years later and held that position from 2004 to 2014. He continues his board service as a director.

“Under Frank’s leadership, the board continually focused on developing and maintaining long-term objectives to drive the success of DCU,” Regan reports. “Consistently through his tenure, Frank has been committed to driving DCU to make a difference.”

Branca’s involvement on the DCU Board came on the heels of a successful career with Digital Equipment Corp., where he rose through the ranks from engineer to VP/operations over a 36-year period extending from 1966 until his retirement in 2002.

“During that time, I was very fortunate to watch Digital Equipment grow from 1,000 employees and $25 million to a multi-billion company with 135,000 employees,” Branca reports. The company was subsequently purchased by Compaq, which eventually merged with Hewlett-Packard.

As a Digital Equipment employee, Branca gravitated toward the credit union that would evolve into what DCU is today.

“The credit union branch was in the building where I worked, which was an old woolen mill, and every week I would go downstairs to cash my check,” he recalls. “At the time, many credit unions—including DCU—did not yet have the capability of offering mortgages. As they grew and added services, there were more opportunities for me to do business with them. I became a DCU member and have done all of my banking through them for the past 30 years.”

When he assumed his position on the DCU Board, Branca leveraged all the customer service skills he had learned throughout the various positions he held at Digital Equipment.

“I spent my entire 37-year career in a customer service business, so I know just how important customer service is,” he says. “When I joined the DCU Board, I was very pleased to see that I was able to transfer many of the customer service skills that I had used over time to this very worthwhile endeavor.”

Specifically, Branca sees a service-oriented focus as the key to retaining customers, which is especially critical given how costly it is to attract new customers in the first place.

“I learned early on in my career how important it is to focus on the customer because, if you didn’t, you were going to lose that customer, and once you lost them, it was going to be very, very difficult to get them back. You had to make sure you understood that keeping your customer happy, based on the services you were providing, was fundamental to what you did.”

In the case of DCU, of course, the customer is actually a member-owner, but Branca explains that the same orientation toward service applies.

“I think the board and the management have been able to speak very clearly in one voice that everything we do is for the member. The reason we’ve had this success, in my mind, is because we’ve been able to keep an eye on the basics, which begins by knowing what your objective is. Growth comes from staying focused on doing the right thing and doing it extremely well.”

Another attribute Branca has brought to the board is a clear understanding of the role that good people play in moving an organization forward.

“Among the best advice I received as a manager was to make sure to surround yourself with the very best people,” he explains. “When I became involved with DCU, there was a team of people in place, both on the board and in the management, who fit that definition. I was fortunate to be among board members who gave me the opportunity to be chair. Together, we worked hard to achieve our objectives. It was a great opportunity to take the things I had learned and experienced over my 37-year career and bring them to a whole different environment as a member of the DCU Board.”

An Effective Governance Model

Branca attributes the DCU Board’s effectiveness, in part, to the use of the Carver Policy Governance model. In this model, the board sets the agenda and objectives for the credit union (the ends) while management executes the day-to-day actions required to achieve those objectives (the means).

The DCU Board has designated nine ends, which range from ensuring members have access to a full spectrum of high-quality financial services, to an initiative for the credit union to be a socially responsible organization.

“The Carver model was already in place when I joined the board,” Branca says, “and I give a tremendous amount of credit to the board members before me who implemented it.

“It’s clear and concise,” he explains. “The board’s most important job is to devise a vision, mission and related statements that clearly set out what the desired results—ends—are to be. The CEO decides the means by which to achieve these ends. The key to its success is mutual trust between the board and CEO. It’s served us well in furthering the credit union’s goal of helping our members be successful in all of their financial dealings.

“The proof, at the end of the day, is how highly we’re rated by our members in the various surveys we conduct and the strong membership growth we’ve achieved,” Branca says.

He considers himself lucky to have worked with Regan, who has been CEO for the past six years, and also with Regan’s predecessor Carlo Cestra. Branca also praises the entire board for its role in achieving effective governance.

“It’s a real team effort,” he says. “We’re very fortunate to have had two outstanding CEOs as well as a dedicated board with volunteer directors who have given their hearts and souls to this endeavor. Each of us has given our very best to take our diverse experience and bring it to bear in doing what is right for DCU’s 500,000 members.”

A Focus on Community and Family

One of Branca’s priorities has been furthering DCU’s community involvement. The causes the credit union has pursued under his leadership include DCU for Kids, a non-profit charitable foundation that has donated more than $6 million to benefit children and their families; an annual memorial scholarship program, which provides $50,000 in annual scholarships to graduating high school seniors; and the DCU Center for Excellence in Financial Services, which provides co-working space within the credit union’s downtown Boston office, mentorship and other resources to financial services start-ups.

“There’s a whole host of programs and initiatives that we offer to help our members grow and be successful, at both the community level and the individual level,” Branca says. “Whether it’s providing training or our state-wide consumer education program or our various service offerings, we’ve been involved in these activities for a very long time. It’s who we are. It’s part of our DNA.”

When he’s not devoting time to DCU, Branca focuses on his family. He and his wife, Peg, have three children and six grandchildren. The couple enjoy traveling abroad, having visited Europe and Asia. Additionally, they enjoy spending time at their vacation home in Florida.

Branca is pleased to have witnessed the growing strength of the credit union movement over the past several decades.

“As the credit union industry consolidates, it’s becoming a force to be reckoned with. DCU is an excellent example. With more than $6 billion in assets and 500,000 members, we can offer a whole host of products and services that are certainly comparable and competitive with any for-profit financial institution.”

As successful as DCU has been, Branca observes that there is always room for improvement. “We’re constantly tweaking our model, and I think the credit union movement at large is doing exactly the same thing,” he says, noting that credit unions will continue to build on their competitive advantage, a commitment to members.

“I think the main difference that sets credit unions apart is that our members are our owners,” Branca concludes. “We’re not focused on the bottom line. We’re focused on doing a better job for our members, and I think we are doing a better job in almost every dimension.”

Diane Franklin is a freelance writer based in Missouri.

accounts grow up with kids
Just as children’s interests and preferences evolve with each passing year, the new Discovery You
Karen Bankston
Karen Bankston

Just as children’s interests and preferences evolve with each passing year, the new Discovery Youth Accounts launched by First Service Credit Union are designed to offer progressive themes, features, and options as young members grow up.

The youth accounts are offered in three tiers: Adventurer for children through age 10, Voyager for ages 11 to 14, and Navigator for ages 15 to 18. Accountholders “level up” automatically. All accounts offer free online and mobile access so children and teens, rather than their parents, can set their own savings goals and make deposits.

A new feature to be added this year will give Voyager accountholders the option to set up webpages to seek contributions for savings goals from family and friends. And Navigator members have the option to open a checking account with a debit card, with special safeguards that prohibit overdrafts.

The $600 million Houston credit union previously sponsored a youth savings program with online content from a vendor offering rewards in the form of prizes. First Service CU decided to design its own program to more effectively appeal to young members across the age spectrum and incentivize behaviors that could make a positive difference in their futures rather than just awarding movie tickets after a certain number of deposits, says CUES member Mike McWethy, executive vice president of the 56,000-member credit union.

The decision to reward young members for earning good grades with deposits to their accounts has been a hit with both kids and parents, which furthers the goal of strengthening relationships with the whole family, McWethy notes.

“We know that getting good grades benefits everyone, and this focus encourages discussions between parents and children about the importance of education,” he adds.

Other youth account features will also encourage family conversations, including the decision of teenagers to open a checking account with their parents’ permission and the option for Voyager accountholders to set up funding requests. “They’re going to have to think it through and work for it, and the credit union will be part of that discussion,” McWethy says.

First Service CU’s marketing department conducted research to help design the tiered program, gathering input from children across the age spectrum from member families and their own family and friends.

An existing 1,700 youth accounts were automatically converted when the new program launched in December, and an online enrollment portal has been established. First Service CU will also be promoting youth accounts through its 12 branches and sharing financial education content through direct mail and email.

“This program is an investment in sustainability for long-term member relationships,” McWethy says. “We want to be the credit union that gave them their first debit card and, down the road, their first credit card, their first auto loan, and their first mortgage.”

Karen Bankston is the proprietress of Precision Prose and a long-time credit union writer.

healthcare checkup
Lin Grensing-Pophal
Lin Grensing-Pophal

doctor holds a pink piggy bankWhen it comes to employee job satisfaction, healthcare benefits have a major impact on any organization. According to the Society for Human Resource Management’s 2015 Job Satisfaction and Engagement Report, employee benefits are more commonly cited as a “very important” factor in overall job satisfaction than compensation and job security.

According to the report, “Research conducted by SHRM and [$385 million/24,000-member] McGraw-Hill Federal Credit Union found that medical expenses were the top financial challenge affecting employees in the last year.” Similarly, 99 percent of employers surveyed said that they were somewhat or very concerned about controlling healthcare costs. Face it. For many employees, especially those in entry level positions, it is benefits—and primarily healthcare benefits—that drives their choice of a job, and satisfaction in that job once they come on board.

The world of healthcare benefits in the U.S. has been a shaky one over the past few years. Consistent and high-profile attacks on the Affordable Care Act, have put health benefits at the forefront of the national discourse for the last several years. Regardless of one’s political opinions on the efficacy of the ACA, it’s undeniable that it has had and will continue to have significant impacts on employee health benefits. 

According to Allen Pease, chief business development officer at Maryland-based ConnectYourCare, “A significant change for employers in 2016 is the movement toward high-deductible health plans because employers can save in taxes by avoiding rich benefit plans.”

Even not-for-profit organizations will have some tax savings by lowering the employer’s portion of payroll related taxes, says Charles Smithers, CEO of National Business Coalition on Health, Washington, D.C. “Employers that allow pretax HSA contributions maximize the tax benefits for their employees and the business,” he says. “Both employer-direct contributions and pretax payroll deferral HSA contributions avoid payroll taxes.”

What to Expect This Year

Many ACA provisions become enforceable in 2016, meaning credit unions and other employers should anticipate some changes and potential challenges to complying with the new regulations.

“One of the larger concerns for companies involved the Affordable Care Act’s reporting requirements for 2015,” says David Martin, managing principal of Atlanta-based Digital Benefit Advisors, a CUES Supplier member. Martin is based in the company’s credit union services division headquarters in Madison, Wis. “Some good news is that the provision was delayed to give companies additional time to comply.”

The reporting requirements referenced by Martin are covered in section 6056 of the Internal Revenue Code. This section, which imposes new data collection and reporting requirements, could be burdensome to many organizations as it may require the implementation of additional information technology systems to gather and process data. Recognizing these challenges, the requirement has been consistently delayed, with the filing date pushed back to the middle of 2016: May 31 for transmittal forms and June 30 for electronic filing.

Barring additional delays from Congress, the ACA’s reporting requirements are something credit unions will have to tackle in 2016. However, the ultimate impact of other provisions creating anxiety among employers is less certain.

“Another component, the so-called ‘Cadillac’ tax, which was set for 2018, seems to be in flux,” says Martin. The Cadillac tax is a controversial levy (to be paid by employers) imposed on health plans whose benefits exceed a certain threshold. Currently, the tax stands at 40 percent of individual plans costing over $10,200 and family coverage costing over $27,500.

As labor and employment law firm Littler Mendleson points out, these thresholds will mean the Cadillac tax applies to many middle-of-the-road plans, not just the rich policies it was seemingly intended to tax.

Despite delays and continued uncertainty over such provisions as the Cadillac tax, Martin doesn’t believe the ACA as a whole is going anywhere. “Some are saying that the act will be repealed, but we won’t see a total repeal—the train has already left the tracks. We might see the Cadillac tax dropped. Employees, however, still need access to quality coverage and service. The system will continue to shift costs, but the ACA is happening.”

Changes to Credit Union Offerings

Long before ACA was officially implemented in 2014, credit unions were discussing the impacts of the new legislation on the benefits for their employees. In a 2013 interview for Credit Union Times, John Harris, CEO of CU Insurance & Benefits Alliance—a Salem, Ore.-based credit union service organization owned by 18 credit unions—predicted the ACA would not noticeably affect larger CUs.

“For most credit unions with more than 50 employees,” Harris said, “there will be very little effect. All the credit unions I have met with will continue to offer a robust group health plan and pay for the majority of the employee’s premium cost. Credit unions typically offer a rich benefit plan to attract and retain good employees. This fact will most likely continue beyond 2014.”

According to some healthcare benefit professionals, Harris’s prediction has more or less panned out; however, they say that, given the new environment created by the ACA, some level of change would actually be beneficial.

Martin’s organization is the employee benefit solution partner for CUES Supplier member CUNA Mutual Group, Madison, Wis., through which they provide services to 3,000 credit unions in all 50 states. “Some credit unions no longer offer employee benefits, but most do and they provide a rich level of benefits,” says Martin. “But that doesn’t mean it’s best for the employee. Some employees would rather invest or specialize in a specific type of insurance, for example.

“What suits a 25-year-old male may not be right for a young couple with children. I believe credit unions ought to shift away from defined benefit packages to defined contribution, to provide employees with something that better suits their needs. Credit unions and other companies never should have been in the business of choosing employees’ health plans. Millennials, for example, will push for more customization of employee benefits.”

Despite what he sees as a demand for greater flexibility and individualized healthcare benefits, Martin believes credit unions generally are lagging when it comes to shifting to an individualized approach. “I would say credit unions are about two to five years behind in shifting to a customized approach. There is resistance to dynamic change, but there are some baby steps that credit unions and other companies can take. They can look at benefits that aren’t necessarily healthcare-related; life insurance, for example. Some employees would rather invest in something else.”

High-Deductible Health Plans

The movement toward greater choice and flexibility for healthcare consumers and increasing insurance costs are also driving a move toward health savings accounts. “These plans are good for people who want to save on premium costs,” says Pease.

In addition to these savings, HSAs are a financial instrument with tax advantages available only to those with high-deductible health plans. Many financial experts tout the tax benefits of HSAs, which include a deduction in current income as well as tax-free growth of HSA assets.

“Overall, the trend is certainly for high deductible plans,” says Smithers. “Some companies started this as a cost-containment process, but now the trend is to put a cheaper product on the street.  The market will have an impact; there will be some retraction of these plans, but not in the near term.”

Employees may worry about some of the downsides to HSAs, which include the following, according to Smithers:

  • High deductible requirement. Even though you are paying less in premiums each month, it can be difficult—even with money in an HSA—to come up with the cash to meet a high deductible.
  • Unexpected health care costs. Your health care costs could exceed what you had planned for, and you may not have enough money saved in your HSA to cover expenses.
  • Pressure to save. You may be reluctant to seek health care when you need it because you don’t want to use the money in your HSA account.
  • Taxes and penalties. If you withdraw funds for non-qualified expenses before you turn 65, you’ll owe taxes on the money plus a 20 percent penalty. After age 65, you’ll owe taxes but not the penalty.
  • Recordkeeping. You have to keep your receipts to prove that withdrawals were used for qualified health expenses.
  • Fees. Some HSAs charge a monthly maintenance fee or a per-transaction fee, which varies by institution. While typically not very high, the fees do cut into your bottom line. Sometimes these fees are waived if you maintain a certain minimum balance.

Direct Contracting

Another trend developing in the wake of the ACA is a move toward direct contracting. “There has been a resurgence of interest in direct contracting relationships due to costs,” says Smithers.

Direct contract plans, while most often aligned with self-funded insurance, are not one and the same. Direct contracts are a cost savings add-on to an insurance program. An employer or third-party administrator (on behalf of employer clients) will contract directly with a provider, sometimes for specific high cost services or drugs, to receive a discount beyond what has been negotiated via the managed care network, carrier or pharmacy benefit manager.

Consistently, employers and healthcare experts point to one factor driving the trend toward direct contracting: transparency. “What is essential … is pricing transparency,” says Pease. “It’s difficult to gain knowledge of hospital pricing because nothing is standard. Pricing transparency would help patients understand the impact of costs and available alternatives.”

“The biggest issue is that employers and employees are exposed to higher deductibles now without pricing transparency,” agrees Martin. “For example, what’s the least-cost MRI alternative? It’s criminal that we have no clue without digging. There is no regulation in the Affordable Care Act or elsewhere to expose true transparency. For example, if you’re told you need an MRI, is it cheaper down the street at an imaging center, at a hospital or clinic? You won’t know without research, and we’re still seeing pushback when patients ask for the information.

“There are accountable care provider groups to create a level of accountability—one organization responsible for the results and outcome of a patient. Those groups exist, but we still have a system that acts in silos, with little communication among the general practitioner and specialists,” he adds.

Like Martin and Pease, Smithers sees direct contracting as a movement with staying power going forward, driven largely by the ability to more clearly tie pricing to benefits and outcomes.

A pharmacy benefit management program is one example. “Price transparency allows companies and employees to get a sense of the difference in brand vs. generic, for example,” says Smithers. “It creates an opportunity to move coverage toward generic prescription drugs and create more transparency in specialty drug costs.

Musculoskeletal management programs, for back and knee pain, also work well in a direct contract situation, he says. “This allows companies to divert away from surgical options, which can be avoided about 60 percent of the time,” Smithers says. “Those who can’t be helped through non-surgical means are passed back to the network surgeon. Companies using this approach can realize savings of 25 percent to 40 percent over traditional plans.

“Other examples of direct contracting include cancer care, surgical care and organ transplants,” he adds.

But the size of the workplace is a factor. “Direct contracting for health care services is most often done in organizations that are self-insured and the ideal size to self-insure is 250 or more employees,” says Smithers. “However the nature of the service will often require more than the minimum number referred to earlier—for instance, a PBM program could be developed to service a 250 employee group, but a musculoskeletal management program usually requires about 7,500 employees. There may be opportunities to bring a number of companies together in a cooperative arrangement within a geographic area or industry segment to take advantage of the increased number of employees in order to do a direct contract for a service requiring a larger population.”

“Employers will continue to deal with costs,” says Martin, “but those can be curbed by direct contact plans, especially for firms with 500 to 2,500 employees, who want to provide better managed plans but don’t have the market power of the largest employers.”

Change as a Constant

Rising healthcare costs and the rollout of several ACA provisions mean CUs will need to prepare for significant changes impacting them and their employees. These include changes in how benefits are managed and reported, as well as a reshuffling of traditional relationships between employers, employees, healthcare providers and the brokers and health plan administrators that act as middlemen.

In terms of future legislation, many experts are holding their breath to see what will develop as the political climate changes. “With 2016 an election year, we likely won’t see any major changes in healthcare,” says Smithers. “We’ll be looking to 2017 to see what happens when the new Congress sets its agenda.”

Lin Grensing-Pophal, SPHR, is a freelance writer and human resource management and marketing communication consultant in Chippewa Falls, Wis. She is the author of The Everything Guide to Customer Engagement (Adams Media, 2014) and Human Resource Essentials (SHRM, 2010).

hr answers employees want career conversations

women smiles in meetingRather than working their way up the corporate ladder, top talent is more often looking for jobs that enable them to develop their skills and increase their value in a future role, according to a report released by Right Management, the global workforce consulting arm of ManpowerGroup.

"Fulfilling Careers Instead of Filling Jobs,” argues that companies can significantly increase employee engagement and reduce turnover by focusing on management strategies that provide clear avenues for growth and prioritize employee development. Managers need to shift from the old corporate culture that emphasized seniority and time served to one that aligns better with employees’ near-term development goals. If not, organizations will find it difficult to attract and retain talent going forward.

“Unless your top talent is able to strengthen their skill sets and managers are regularly talking to them about opportunities ahead, pretty soon they’re going to ask: What am I doing here?” notes Mara Swan, global leader of Right Management and executive vice president of ManpowerGroup. “People rightly see their skills, experience, social networks and ideas as assets—if companies aren't helping cultivate them further, employees will look elsewhere.”

Of the many factors that motivate individuals at work, two-thirds are related to career conversations. Organizations benefit from the improved engagement and increased productivity that follows when employees are equipped to take on new challenges and opportunities. The No. 1 thing employers can do to engage talent and improve performance is to take a bolder, more proactive approach to creating and facilitating career journeys.

Right Management’s report offers recommendations for employers (page 10, “What is talent hungry for?”) on how to create a culture of professional development, including:

  • Create an Agile Talent Pipeline: Cross-train, re-skill, and upskill employees to develop a talent pipeline capable of meeting changing business needs.
  • Continuous Learning: Understand the career needs and aspirations of all segments of the workforce—from the best and brightest employees to those with high potential but low preparedness — and create developmental programs that encourage continuous learning and growth.
  • Provide Opportunities: Provide all employees with opportunities to acquire new skills and knowledge to increase their value and employability.
  • Develop Career Models: Develop functional and enterprise-wide career models, with career pathways.
  • Integrated Resources: Integrate a wide range of developmental resources, including both person-to-person collaboration and technology-enabled learning
good governance the origin of civility
Michael G. Daigneault, CCD
Michael G. Daigneault, CCD

balance of healthy conflict graphI’ve been thinking a lot lately about the word civility. And if you’ve been following the national political races – or even if you’ve only been watching the nightly news – you can likely understand why. There’s been a significant lack of it recently in the public sector.

It concerns me, and my guess is that it concerns you, no matter what your party affiliation. What does this lack of civility mean for us as a country? For how we will govern ourselves in the future? What lessons are we teaching our children? What lessons are we learning ourselves?

Surprisingly enough, this same word – civility – has been surfacing more and more as we think about our work with credit unions and others in the nonprofit sector.

Because I’m a life-long learner, I decided to take myself back to school on the notion of civility itself. The word’s origins stretch back to the late 14th century, when the French used the word “civilite” to denote the “status of a citizen,” and the English translated the word as “courtesy.” But it is the Latin derivative of the word that surprised and delighted me the most – “civitatem” was defined as both “the art of governing” and “courteousness.”

Isn’t that perfect? Isn’t that what we all need on our boards – a little more focus on the “art of governing” and more “courteousness?”

I won’t bore you with a long list of boards behaving badly, but I would like to share with you a few examples that we’ve experienced recently. We’ve:

  • seen board members texting each other, under the table, in the middle of board meetings;
  • interviewed board members who said they felt like they “had a target on their back”;
  • witnessed others interrupting their colleagues and shouting to get their points across during the middle of meetings; and
  • heard staff describe conversations where board members are approaching them to get the “dirt” on their CEO’s performance.

I’m not suggesting behavior like this is rampant or that it exists on all boards, nor am I suggesting that a normal amount of give and take, or even conflict on a board isn’t healthy. It is. In fact, boards that experience absolutely no conflict, or those that are in complete harmony, are just as dysfunctional as boards that are always in conflict (see the graphic at the beginning of this article). There is a balance. Just like in a good marriage, an appropriate degree of conflict is necessary. You just need to be sure that you’re disagreeing in an agreeable way.

But even if your board is the healthiest board in the world, our research indicates that there is still room for improvement…for greater civility…to sharpen your focus on the “art of governance.”

One in five board members that we surveyed for the 2016 Quantum Governance Compendium reported that their board is doing a less-than-effective job at building a leadership culture of trust, and that same survey reports that less than 25 percent said that they are very effective at asking the hard questions that need to be asked.

So, then, what does that mean? Look around you. One in five of your colleagues isn’t feeling the love; a high level of trust is not resonating at the board level. And only one in four of your colleagues thinks that you’re asking the right questions in the boardroom.

I know. This post sounds like it’s full of doom and gloom. That certainly wasn’t my intent. But it is a wake-up call. Increase the civility in your boardroom – in the Latin sense of the word. Be more courteous. Sharpen your focus on the “art of governance,” while you push yourselves to have the hard conversations that leading a credit union in today’s competitive environment demands.

I am not suggesting that you practice the “art of governance” at the risk of foregoing your responsibilities as a board member or that you should stifle your dissenting opinions to keep the peace. The “art of governance” is not about being nice and passive in your boardrooms.

But, don’t confuse strong leadership with being discourteous, unprofessional or disrespectful.

The true art of governance is about being in the middle of the bell curve, with a good and healthy balance of open and challenging discourse in an environment where everyone plays respectfully in the proverbial sandbox.

Michael Daigneault, CCD, is CEO of Quantum Governance L3C, a CUES strategic provider of governance and board assessment services in Vienna, Va. Daigneault has more than 30 years of experience in the field of governance, management, strategy, planning and facilitation. The organization fields more engagements in the credit union community than in any other, a total of 40 percent of its work.