Real Teaching Moments With Our Members

The old gentleman’s eyes looked away as he sat at my dinner table and told me this story from his youth back in the 1930’s. It was going to be a perfect day. His class was going down to the lake for a class outing and picnic. Each student was to bring a sack lunch for the day. 

The boy was the son of a farmer and times were very lean in 1930’s for rural farmers. The boy gave his mother a week’s notice that he would need to take his lunch. On the day of the outing his mother handed him a sack lunch with a tomato biscuit, a country ham biscuit, and a biscuit with homemade butter and jam on it.  The boy excited about the day, kissed his mother and left for school.

The ride to the lake was enlightening for the boy as he heard everyone ask one another what they had brought for lunch. As the students headed toward the lake the boy held back and found an old stump with a hole in it. He quickly shoved his sack lunch down the stump hole and ran after his classmates.  When it was time for lunch he pretended not to hear the voice of his young teacher. She was new to the small country school and had come from the city.

The teacher called to him again and this time there was no ignoring the urgency or tone of her voice.  “Where is your lunch?” she asked when he joined the group with no lunch sack.  “I forgot it at home” he replied.  “Well then you can have my tomato sandwich” and with that statement she handed him her sandwich and then reached into her purse and pulled out a slightly crumpled sack. 

“I am going to have a biscuit” and with that she pulled out the country ham biscuit the boy’s mother had packed and started to eat it and commented to the children that she had never had a country ham biscuit before.  The boy stared at her with dismay.

The old man paused as he told the story and his voice caught for a moment. He explained then that he had been ashamed of the lunch his mother had packed as it was a poor farmer’s lunch.  That morning on the ride over to the lake he had heard that the other children were all having white bread sandwiches; which back in the 1930’s was a luxury.

The man’s eyes focused on me as he finished his story. He said, “After all these years I still remember her and how much pride I felt as she ate my mother’s biscuit." He then added, "She was a good teacher.” 

Now think of our members today. The average consumer is saddled with $6,493 in credit card debt and juggling an average of six open credit cards, according to credit health website Credit Karma’s latest data. That’s just our member’s debt on plastic. We have members who see others getting ahead but like the boy in the story stand back ashamed to speak up and ask for help. They see themselves struggling when everyone else is getting ahead. They see their homes, with a typical mortgage of around $171,665, sliding underwater in equity. They wonder how they ended up with the typical auto loan of $15,152, plus another $29,572 in student loans on an education that has not delivered all that had been promised. That’s a  grand total average of $222,800 for the average consumer.

For many credit union members the recession played fast and furious on their household finances, and left many families struggling paycheck to paycheck.  Paying a car, home, or college education in cash has become impossible for most. For many, putting the grocery bills on a credit card is the “new normal “that happens each month in order to pay the mortgage or the rent.

Each month of the “new normal” blinds the member to the dangers ahead of them. So what are the red flags we need to educate our members about to help them see the spiral of relying too heavily on credit?

As the financial experts we need to be aware of these three road signs and do our part to educate our members.  I would hope that every credit union leader reading this blog offers some type of free CBR review for their membership. If nothing else each of you should post these warning signs to your brand new Facebook page. Remember that new social media blog you have started but were not sure how to make it actionable? Well, my suggestion would be to post this on that blog and then add a line about calling the credit union to get a free consultation to look over your credit bureau.  So without further fanfare here are the teaching points we should all be educating our membership on. These points have been written so you can publish them straight to your membership

Credit Warning Signs To Post To Your Members

You’re Only Paying the Minimum. 

If you’re paying the minimum on your debts, two things could be happening: you’re using more cash toward expendable monthly purchases, or you can only afford to pay the minimum. In both cases, you aren’t prioritizing paying off your debts. Paying only the minimum might mean you’re making affordable payments month-to-month, but you could end up paying hundreds or even thousands of dollars in interest over time—you’re essentially paying the bank to maintain your debts. Reset your budget to pay more towards the minimum payments.

You’re Turning to Plastic to Pay What You Can’t Afford.

How often have you realized you’re low on cash or emptied your checking, and needed to use your credit card instead? True, one of the uses of a credit card is that it allows you to buy things you couldn’t otherwise afford. But on the flip side, should you be financing something you can’t pay for right now? Your debts accrue interest and make it even more unaffordable over time. Putting a $600 purchase on an 18% APR credit card and paying just the minimum results in $300 in interest charges over the life of the debt—that’s a 50% increase from the original debt! Your credit card is best used to pay things you can afford to pay in full every month; that’s the credit-building action that boosts your credit score and steers clear of debt.

Your Credit Score is Falling.

Relying heavily on credit isn’t just costing you money; it compromises your financial future. When lenders take a look at how much debt you are carrying and how much credit you use, it’s a sign of risk that you may mismanage or default on the credit they extend you. Plus, with debt and credit use factoring into about 30% of your credit score, a decreasing credit score is the first sign that you are in over your head. If you don’t know where you stand with your credit health, start with checking your credit score regularly for free at Credit Karma and monitor for any drops in your score. Contact your credit union and ask them to go over your credit with you.

Practical Application

Looking to add loans to your bottom line? Start a promotion educating members on the nature of credit. Offer tools like Credit Karma for online members. You should also offer a free credit review to every new membership you open. Go over the CBR with them and talk about the impact of slow pay or other items you find in the trade lines. Look for outside debt and look to refinance that debt saving the member even more money.

Some of our members are confused and ashamed of what they simply do not understand. Rather than bury those questions and ignore the problems we need to help our members by creating real teaching moments and showing them how they can move forward.   

Visit CreditKarma to learn more about online credit monitoring solutions you can offer your membership

Credit Union Culture: Cooperative or Cut Throat ?

Who is the Enemy At the Gate
In my capacity assisting credit unions with their Business Continuity planning, I have noticed a great deal of distrust among the credit union family. Many credit unions feel that their sister credit unions are their enemy.  While friendly competition should be the norm, the attitudes I detect seem to be of a much more cut throat in nature that contradicts the cooperative spirit of the movement.

While conducting training for the management team of one credit union, my suggestion of credit unions supporting each other in times of crisis was viewed as an anathema.  Sending the little old lady trying to cash her Social Security check to the main branch five miles downtown was preferable to setting up a mutual agreement with another credit union with a nearby branch to offer one teller space in the event of a crisis.

The Not So Cooperative Nature of Credit Union's 

Shouldn't “People Helping People” extend to “Credit Unions Helping Credit Unions”?  I certainly think so.  ALL credit unions should still be part of the cooperative network. Yet, too often many credit unions seem locked into “If Acme CU is bigger than me, they must be stealing membership from me!”  Though not a new development, it certainly seems to have gained momentum in recent years.  Perhaps it is an outgrowth of the community charter movement.  Perhaps it is as a result of the regulatory pressures brought on the management.  Perhaps it is fallout from the economic times.  Perhaps it is a combination of all three.

Credit Union membership shouldn’t be a zero-sum game!  Credit Unions don’t steal other credit unions members.  After all, unlike the NCUA thinking as they initially proposed their new corporate rule, real people can be a member of multiple credit unions without impunity.  People will become members depending on service, services, locations, and rates.

Credit unions should actively recruit new members from the population who don’t know the benefits of credit union membership.

We Need A "We Are the World" Moment

Credit unions should help each other out. We should embrace our common mission and unique charter and join together to help offset the enormous expenses we incur as smaller community based institutions. Mutual assistance should be le mantra de jour, not the exception.  How?  Here are a couple of simple examples to provoke some ideas:

• If one credit union’s branch is incapacitated, for whatever reason, other credit unions in the community could offer working space or teller space, especially if it were a mutual assistance agreement.  This is ideal if both use the same core systems.
• Consider supporting each other with staffing assistance.  Why pay the fees to temp agencies for temp staffing when another credit union might lend a person who’s already trained?
• Consider using staff from other credit unions to assist in facilitating Business Continuity exercises with inputs and role playing.  They could act as press, disgruntled members or members with off-the-wall questions to enhance the stress of the exercise.  They could also work as trusted agents assisting the exercise facilitator.
• What about some joint public events?—Sponsor a lunch & learn about credit unions; host balloons and ice cream event in the park for kids and young parents (potential members, right?); organize a pet parade to support the local animal shelter; provide staffing for the local public radio fund raiser.  OK, I may not be the most creative in the world, but you get the idea!

The Battle for Board Walk and Park Place

Like power hungry community titans in a real life Monopoly game some credit unions seem bent on owning all of Board Walk and Park Place and leaving only Baltic Avenue to their credit union neighbors. This credit union distrust seems especially intense where several credit unions share overlapping community charters.  Each credit union sees the same pool of potential members as “theirs" and as they seek to increase their membership they perceive themselves in competition for those members with other community based credit unions. 


This sense of competition can be a good thing.  It could force each of them to evaluate their mission, their service, and their approach to the various segments of the community.  Yes, even though they all have community charters, their potential new members are grouped into different and specific demographic segments.  Credit unions should play to their strengths, play to their best demographics, play to building a loyal following. Viewed correctly, each should find a synergy with the other credit unions that can become a growth multiplier in the membership recruiting game.

OK, so who is the enemy?  It’s certainly not the other credit unions.  It’s the banks who see us as playing on an unfair field.  It’s the banks who try to impede credit union progress (should we be looking to them for critical services?).  It’s the banks who want to make sure credit unions are taxed.  It’s the banks who won’t support the underserved.  It’s the banks who are so creative at imposing additional hidden fees. It’s the banks, with their lack of real interest in their customers’ welfare, who should drive credit union membership.

That’s where the credit unions should focus their animosity.  Not at each other!

This blog article was written by Ken Schroeder, Vice President for Business Continuity at Southeast Corporate, where he is responsible for the life cycle management of all business continuity functions. Mr. Schroeder provides consulting services to member credit unions and has been a featured speaker at numerous conferences, forums and other events. You can learn more about Ken at Ken Schroeder

CFO Corner: A Glass of Liquidity – Hold the Rocks: Your Liquidity Strategy

Everyone Is Drunk on The Spiked Kool Aid

It was a nightmare…flashing lights…loud music…empty dance floor. No, I wasn’t in some 70’s throwback bar it was actually the client party for a financial services convention. Everywhere I looked people were laughing and drinking to music that most of them had never heard before. These same industry leaders last year were wringing their hands unsure of NCUA assessments, watching their capital reserves drop before their eyes as commercial loans in sand states literally bit the dust.

Last year the only liquidity anyone was thinking about was what they could pour into their glass as they were hoping it was all a bad dream. Fast forward to today and the world is upside down as Big Banks have emerged stronger with higher assets, broader consumer bases and TARP has becoming a bad memory as quarterly profits erase past mistakes.

Credit Unions have begun to breathe again as evidenced by the record attendance at this convention. Credit union leaders are feeling better about their financial positioning and are starting to get some swagger back in their step. Watching everyone else talk about recovery even I was starting to get a smile on my own face. Then I read this great article written by Edward Lis, our CEO guest blogger, and suddenly I had to wonder why were all of us drinking the spiked Kool Aid when 12 months ago we thought the sky was falling. 

So here is the million dollar question, “Why be concerned now about liquidity when most credit unions are awash with funds resulting from a flight-to-safety fund inflows and loan portfolio outflows due to lack of loan demand?” Edward lays out some thoughts every senior management team should be considering as they prepare a liquidity strategy for the next rising-rate environment that some economists are predicting could kick off by late-2011.

The Fly in the Kool Aid

Before you waive off the article as the fly in your spiked Kool Aid consider that rising rates typically are used to manage economic recoveries. So it is likely rising rates will be accompanied by a return of flight-to-safety funds to the market and a spike in loan demand, putting many credit unions back in the tight liquidity environment of a few years back. Many credit unions have rate floors under their variable rate loans.  As rates move up, rates on these loans won’t move for a while. But your cost of funds will. The result is a compressed net interest margins or NIM.

The objective of a viable liquidity policy and strategy is to provide a framework to minimize the adverse effects of a significant and sustained liquidity crisis.  This can result from changing economic or interest rate conditions, deposit outflows, unusually strong loan demand, intense competition, an international crisis, or any other factors that can deplete the liquidity of the credit union.

In the event of a serious and sustained liquidity crisis, you might find you need to adopt various strategies. Some of these strategies are preventative and must be implemented prior to the onset of a crisis.  Other strategies are reactive and may be implemented immediately.   The strategies will differ in terms of the implementation time, costs, risks, financial implications and regulatory consequences.

  

Looking for a Glass of Liquidity – Hold the Rocks

The first place to look for sources of liquidity is within your own balance sheet. Some areas to consider are listed below.

• Loan Payments and Prepayments-a credit union may write loans with long repayment schedules, however, with that said; loan portfolios continue to be relatively short term-the turnover rate. Track and test loan payments and prepayments in all economic environments to estimate the level of cash inflow to the credit union under a variety of scenarios. As a reminder, when interest rates are falling-prepayments will increase, and when rates are rising-prepayments will slow down.

• Increasing Member Deposits-to bring about an inflow of deposit funds without cannibalizing previously deposited funds are often referred to as “disparity” or “segmentation” strategies. They are designed to identify depositors based on rate sensitivity and encourage an inflow of deposits when needed.  You should be forecasting your liquidity needs and anticipating those needs in the marketing of your deposit products.

• Selling of your Assets-mortgage loans written to conforming loan standards can normally be sold in a short period of time with one major issue to remember: Loans will be sold at their “market price”, which may be more or less than their “book value”, depending on the current level of interest rates. Other types of loans have the potential for sale as well, i.e. consumer loans

• Non-Member Deposits-non-member deposits, also referred to as brokered funds, can provide near-immediate and short-term funding.  Note these come at a high price and the funds are very rate sensitive.

• Loans from the Corporates-the corporate credit union is still the lender of first choice for a majority of credit unions. Loans fall into two major categories: A line of credit and a term loan. A Line of Credit-these come in two varieties: committed and uncommitted. A committed line, most common, the credit union pays a fee based on the size of the line and its duration. There is a contractual assurance that the funds will be available to the credit union when those funds are needed.  An uncommitted line of credit, funds may be available based on the lender’s-the corporate-ability and willingness to fund. Generally, there is no charge for an uncommitted line of credit, but the certainty of obtaining the funds when you need them could be in doubt.

• Term Loans-these involve a specific amount borrowed for a specific period of time. It may be a bullet loan with the principal due in full at maturity, or an amortizing loan similar to an installment loan. Rates can be fixed or variable.

• Federal Home Loan Bank (FHLB)-the FHLB is a quasi-government organization with the objective of supporting and providing loans to financial institutions that make first mortgage real estate loans or that purchase and hold mortgage-backed securities. These organizations offer a diverse line of lending services to qualifying credit unions. Much like the corporate system, liquidity from the FHLB involves lines of credit and/or term loans at fixed or adjustable rates often at more favorable rates than the corporates.

To borrow directly from the FHLB, a credit union must be a member. To be eligible for memberships at the New York Federal Home Loan Bank refer to

 http://www.fhlbny.com/aboutus/membership.htm.

Note: For a credit union not belonging to the FHLB, check to see if your corporate credit union has an agency relationship allowing the natural-person credit union access to FHLB resources without becoming an FHLB member.

The Central Liquidity Facility-the Central Liquidity Facility is administered by the NCUA Board.  CLF advances to natural-personal credit unions are normally limited to short-term, temporary needs. Borrowing directly from the CLF requires that the credit union apply for membership in the CLF and purchase stock. However, many corporate credit unions are appointed as CLF agents and may be able to facilitate an advance to natural-person credit unions that are not members of the CLF. For more on the CLF refer to the following link :  Http://www.ncua.gov/Resources/CreditUnionDevelopment/ResourceConnection/Files/Partners/NCUA-CLF.pdf

The blog entry you have just read was written by Edward Lis who was a former CEO and CFO of two different credit unions. If you enjoyed this article I encourage you to learn more about Edward by visiting www.edwardlis.com

Don't just read the blog become part of the blog by submitting your own article or by leaving a comment below.

Money To Burn: Three Strategies To Rethink

Nerd On The Run 

What a great memory touring Washington DC on a Segway. Yep, that sentence automatically nominates me to the Nerd Hall of Fame. There I was gliding around people and taking in the historical sights of the Capital. As I was trying to move around town and not run over people or fall on my face I could not help but notice the different ways people were taking in the sights of the capital. Some people were on tour buses, some were on rented bikes, some roller blades, and lastly some just walked from one point to the next. No matter the method people were taking in the sights and enjoying the weather in a way that fit them. 

What really struck me was that even though we were all going down similarly marked paths we were going about it in different ways with each of us expecting different things from the journey. You could literally see the difference in generations by the reaction I created as I glided past someone on the Segway. Small children pointed and said they wanted to ride. Young adults looked bored as seeing a Segway was nothing new; just a guy in a nerdy bike helmet riding a Segway. Older tourists stepped to the side and looked at me with distrust. They were visibly afraid I would suddenly lose control of the technology I was riding  and go crashing into them. Each group saw the same technology on their path as something different. Some saw amazement, some saw the normal or routine, and some saw something they simply did not trust or understand.

I think the same reaction is happening in financial services as we try to understand the sweeping changes that have enveloped our industry over the last three years. To combat consolidation in the market many credit unions are adopting technology that is supposed to help understand  the member and deliver cost efficiencies . Yet, that same technology is often sweeping in nature. So credit unions find themselves trying to navigate a path with all those same groups I almost ran over with my Segway. Like me on the Segway many credit union management teams face the same challenge of trying to create a uniform experience across age groups and delivery channels. They face the same concern that they don’t want to lose control of the technology and end up taking themselves out.

There are many different strategies out there and all of them seem to come with a complimentary white paper and free webinar on how they will revolutionize the way we serve our members. One thing I do know is that some of these strategies are the wrong strategies. I suspect that for some credit unions the key strategies they are adopting fall into a couple common themes. As you ponder these three strategies I want to share with you some research, that I believe is relevant, from the Raddon Financial Group (http://www.raddon.com). 

Tell Them We Are Not a Big Bank and They Will Come…

Yawn….they paid the money back! People have put TARP in their rearview mirror. The truth of the matter is that Big Banks went to Capital Hill, got a spanking, and then on the way out of town they grabbed all the assets, improved market share, and got a nice check for a couple billion as they walked out the door. Anyone seen a Ally Bank commercial lately? We all know they were wearing black hats at the start of the congressional hearings but when they left the building they had a new image, a new name, and a new slogan. This means that for many small community based financial institutions they are now competing with Big Banks with even more assets, with larger consumer bases which allows them to lower their cost per transaction even more. The added insult for many credit unions is that the average consumer has a very short memory or is oblivious to all the changes that have happened over the last three years. There simply is not a lot of road left on this message and strategy.

Free Checking –Leave it Free and They Will Come … Be Careful What You Ask For

Many of us are aware most Big Banks have eliminated or reduced free checking. On the other end of the spectrum most credit unions have adopted a “wait and see” strategy hoping that they will pick up deposit growth from dissatisfied bank customers. There are some basic assumptions in this strategy that credit union leaders need to validate. The chief assumption is that the growth will come from depositors you would want as members. If you break down consumers into six broad categories (Fee Driven, Credit Driven, Middle Market, Low Depositor, Middle Depositor, and Upscale) the majority of consumer movement is in on the lower end of the spectrum. Big Banks are driving away non profitable customers and credit unions are assuming that they will suddenly turn into profitable members.

Imagine a large exodus of millions of people. Each person is simply being driven out from where they were. They end up going down the path of least resistance and end up in a temporary camp. Imagine the town next to the camp being filled with kind hearted people who decide to take them in and help them back on their feet. This action is noble and it is in many ways heroic. What it is not is profitable in the short term. The towns resources are used without anyone paying additional taxes. The same thing will happen with credit unions as they become the refuge for unprofitable Big Bank customers.  Many of those that are being driven from the banks are the people who are “Fee Driven” and that segment simply is not credit worthy for the loans you will want to lend to them. So now you have low deposit, high transaction members who are credit challenged. 

I am not saying credit unions should not be the refuge for these members – we are here to serve the underserved. I am simply suggesting that the strategy has inherent challenges that need to be thought through.  Maybe you are counting on the fee income from overdraft from these members. Looking long term that source of income is squarely on the radar for the new Consumer Financial Protection Bureau who will see this income as part of their mission to make sure that markets for consumer financial products and services are fair, transparent, and competitive.

Build or Buy the Technology and They Will Come

The media loves technology and all the buzz words that come with that technology. Apps, living in the cloud, DROID, mobile, tablets, all of it just sounds cool. When you listen to that tech vendor with the great PowerPoint you almost think it is time to shutter the branch network and go virtual. Well, before you make any big budget decisions I want to provide some additional points of thought to consider. One thing to ask yourself is what do members value the most at a financial institution. The answers are as follows; Free Checking 76 %, Good Service 70 %, Convenient Branch Locations 48 %, Good Online Banking Experience  41%, NSF Fees (under 30 $) 28%, Loan Rates 18%, Deposit Rates 17 %, and Mobile Banking 12 %.

It seemed odd to see the branches ranking 3^rd on the list when it seems in the past month or so I have read numerous blog articles calling for the reduction of branches as they are becoming obsolete.  I have no doubt that members will continue to shift from branches to other delivery channels like online and mobile. That being said the biggest driver of member satisfaction other than free checking was good service. Where does the majority of that good service happen? In the branches. True, a great call center and back office staff are added bonuses but most member interaction is still face to face in the branch network.

When members were asked what would make you move your PFI the answers were; Lack of free checking 34%,Service Issues 31 %,NSF Charge (over 30$),Branch Hours/Location13 %, Deposit Rates 13 %,Online Banking 11 %,Loan Rates 10 %,Product Range 9 %,& Mobile 4 % .

What does all this mean? It suggests that it is hard to move the type of members we want to move from Big Banks. When polled 50 % of financial institution consumers said they believe they receive better service at a smaller financial institution. We also know that service continues to resonate with consumers. I believe any strategy we adopt has to also find a way to empower that teller or member service specialist in helping them feel valued in what they are trying to do for the membership. This is a hard sell. It is more fun to buy tech than it is to create incentives for great service.

So now I have poked holes in the three strategies I have heard recently. Please feel free to pass this blog article along to someone else so they too can mutter under their breath. As always this is a dialog in which I hope to generate additional ideas on how we can all compete and thrive against Big Banks. Now leave a comment so you can influence the next reader and let’s make a difference for small community financial institutions together. 

Moving Past Our Jekyll and Hyde Debate - Selling The Credit Union

“Desires dictate our priorities, priorities shape our choices, and choices determine our actions. The desires we act on determine our changing, our achieving, and our becoming.”

A Story of Jekyll and Hyde

One of the most famous stories on our desires dictating what we become was written by Robert Louis Stevenson who captured this constant struggle between the warring nature of desire when we he wrote the novel about Dr. Jekyll and Mr. Hyde. The story tells us that in the beginning “Dr. Jekyll is a highly respected London physician [picture Brad Pitt] a good and kindly man, who in his youth had showed inclinations toward evil which he put behind him. As a doctor who has to learn about various drugs, the doctor comes across one which enables him to change his external form to that of a repulsive monster, the very embodiment of the evil lurking within him, whom he calls Mr. Hyde.”

This same warring between two sides is alive and well within the credit union movement. The irony is that each side sees the other side as the evil “Mr. Hyde”. To some in the credit union industry the drug that brings the hidden evil to the surface is the concept of “sales”.  They worry about greed and lack of internal controls. They picture member business lending running wild or tellers trying to push product through the drive through lanes. Sadly, there are examples of this in recent headlines. Texans Credit Union at 1.6 billion is the most recent victim of a sales process that went awry as they concentrated their efforts into business lending only to end up under NCUA convseratorship.

When you hear the word 'sales' what comes to your mind? For some credit unions, the word “sell” engenders a feeling akin to a tooth extraction with rusty set of dental tools. In other credit unions, the same word is on the hearts, minds, and lips of every employee. They walk around in some type of "bliss like" state trying to uncover unmet member needs.

Redefining Sales

However, almost every credit union misses out on the most important sale of all. This is not a product or a service rather it is the opportunity to “sell” itself as an institution to its members. Many credit union employees have been with their credit union so long that the value and benefits, which are derived from being associated with a credit union, are second nature. Unfortunately, this simply isn’t the case with their membership. Every credit union employee and volunteer (i.e. employees, senior management, and board member) should take every opportunity to discuss with their members the substantial benefits that come from using a credit union.

The practice of selling the credit union is much more than a theoretical exercise. There are real life consequences which will naturally follow. Taking a few minutes at the end of the loan process to share with the member, in terms of real dollars, how much they saved can make a tremendous difference. It is about painting a picture or telling a story that the member can understand. Sometimes the value we create gets lost in the numbers. Instead of talking about percentage points you have to put it into something more tangible. Imagine the member hearing “Mr. Smith, we have saved you $4500 in interest over the next 4 years as compared to that bank up the street”. That is real money that is going straight back into his wallet. This does two things: Mr. Smith will realize that he trusts the Credit Union and will want to make the credit union his primary financial institution (PFI) and he will tell many of his friends and family about how much money he saved the next time he sees them.

Many leaders in the credit union movement are extremely concerned about growing their organization in a sustainable manner. By simply reinforcing the perceived value (remember, the actual value is already there!) provided by the credit union, individuals will become promoters on behalf of your credit union. This will dramatically increase both the wallet share and the market share which the credit union enjoys among its membership. Wallet share will be increased in a number of ways. First, each new "promoter" will deepen their total relationship as they migrate from a “car loan” member to one in which the credit union serves as their PFI.

As your members tell other individuals that are “car loan” or minimum share members, their association will begin to evolve into deeper relationships. Ultimately, a higher percentage of existing members will yield far greater and far more sustainable income.

Another benefit that will come from selling the credit union will be the new members that will result from an army of "member-promoters" sharing their positive experiences with others. Some will become members right away. Others will hear the message and, when they receive poor treatment at their current financial institution, will decide to see what everyone is talking about. This becomes a self sustaining cycle. Happy members tell other people (members and non-members). These primary converts then tell others who then become secondary converts. The cycle continues.

Moving Past Our Own Reluctance

Unfortunately, with any new practice or habit, there is a tremendous amount of inertia which must be overcome. Organizational resistance and lethargy will, in the beginning, make progress seem slow. Some staff may feel that they shouldn't need to tell people what they should already know. However, with many things, practice makes permanent. Each time the staff sells the credit union, it will become easier and easier. It is critical that credit union sell occurs every time. If it doesn't, the cycle will grind to a halt.

At the end of the day everyone who works at a credit union is in the business of helping members understand the real value of what they belong to. To help them understand that value you have to help them wake up by sharing some real life practical advice.

Too often the only advice being offered by financial institutions is related to helping the wealthy plan how they will retire on a beach with a hammock. Let the banks fight over the same small slice of affluent consumers as they keep recycling tired overpriced “wealth management” services. As credit unions our mission should be a touch more noble.

We have to help our members with “life management” advice. We need to help our members who are caught in that cycle of purchasing things they don’t need, with money they don’t have, to impress people they don’t even like, see past the poor habits they have developed. We have to move past the debate of what type of sales culture we need to have and start getting our members to become our advocates by first being their advocates.

This blog article was written by Matt Mecham, who works for a large "small town credit union". In the past Matt has worked for several credit unions ranging from $250 million to $1.3 billion. He has seen firsthand the differences between large and small credit unions, as well as the different challenges faced by each. To learn more about Matt please visit his profile @Matthew Mecham

Look, Listen a Little Harder...Hard Lessons From Hong Kong

Avoid that camera shop and street; it is run by Chinese Mafia

Last year I was in Hong Kong and it looked like Times Square in New York. Neon lights everywhere. I was dazzled by all the lights and the people. It a scene I will never forget because I got lost on my first trip to Asia. Our tour guide pointed out a street close to our hotel and said, “Avoid that camera shop and street; it is run by Chinese Mafia.” He might as well have said, “Hey, you need to go down that street. As soon as I was checked in, I went exploring in my Hawaiian shirt and rolled up cargo pants.

The streets were crowded and there was so much to see. Every store had something new and each vendor was cooking something I had never smelled or seen before. I took note of the camera store and the street I was on. Luckily the streets signs were in Chinese and English.

After about an hour I noticed I was the only tourist walking around. More and more there were expensive cars parked on the streets, with very mean looking drivers resembling the bad guys in a Hollywood movie. The words Chinese Mafia no longer sounded so interesting and I decided it was time to turn back It was then that I noticed the street signs had changed and were no longer written in English.

Pick Pocketed and Lost - Perfect Everything is Going According To Plan

Being such an experienced world traveler, I figured I would go to my back-up plan which was to show my hotel card key with the address on it and have a taxi take me back to the hotel. As I looked at the hotel card key, though, I discovered I had brought the one that did not have the address on it. To make matters worse, as I patted my pockets, I found that I had been pick-pocketed and all my cash was gone.

Feeling sorry for myself and trying to recount my way, it hit me that I could not remember exactly all the twists and turns I had made. Suddenly I found myself in a situation and a place I had not expected to be in. Too often this same thing happens to our members as they find themselves in economic circumstances they did not anticipate. They look back and find they did not recognize the twists and turns in life, and find themselves financially lost. They are unsure of what steps to follow to get back to a place where they feel safe.

Tired from worry I made my way back to a more crowded part of the street and saw the camera store. Once at the store, though, my hopes were dashed as I saw it was another camera store that looked exactly the same as my landmark. Now completely lost, I kept walking as I didn't want to just stand still in my green Hawaiian shirt looking pathetic. After all as an “experienced” world traveler, I was trying to blend in.

Listening To The Universe -The Idiot Walking around Blindly in Hong Kong

As I was walking, I kept pushing past the sidewalk stalls and the people who were trying to sell me clothes or custom made suits. Then I got an idea--a moment of pity from the universe to me, the idiot walking around blindly in Hong Kong--and the idea was … LISTEN.

Listen to what? Everyone was speaking Chinese! Then I noticed the tailors trying to sell me a suit were Indian and that they had been speaking English. Elated, I started to go from one Indian tailor to the next asking if they had heard of my hotel.

Then as I was speaking to a tailor, I got another great idea as he pressed his business card into my hand, which was to … LOOK. I looked down at the card and it looked like the other cards I had thrown in the trash as I was walking, but this time I turned the card over. There on the back of the card was a map that showed how to get from any hotel to this shop where I was standing.

Within a half hour I was back in my room safe and sound.

The same principles that helped me find my way back apply to our members who are looking for financial solutions. We have to listen to our members as we interact with them. We can’t sit back and assume they will ask for our advice. Too often our front-line staff fails to hear the unspoken questions our members want to ask someone.

We have to get our staff to look up from that teller transaction slip or computer monitor and really seek to understand what is going on in front of us with our members. Seeing who is in front of us is not always as easy as it sounds.

Years ago I recall dropping my four-year-old daughter off for preschool and the classroom had glass walls. I went to the classroom next door and watched her. She sat on the floor and cried. As a new father, my heart broke. I stood 10 feet from her, but she could not see me because she would not look up. I was there right in front of her.

We have the ability to really make a difference in the lives of the people we serve and come in contact with. These are people from our own communities, people who are trying to recover from one of the most severe economic downturns in recent history.

Some of us know people who are trying to get back on their feet, good people who have gotten lost in corporate downsizing or trapped in the mazes of underemployment. It is easy to not listen or to not look up at them directly. It is too easy to only see the Beacon score or the latest overdraft fee because they are living off overdraft each month.

This view is short-sighted, to say the least. Big banks have a similar, “only the financially healthy need apply" mentality.

Listen to the next loan application your loan officer takes. Is he or she listening to the member to gain real understanding? Is the loan officer asking questions about outside loans that can be consolidated to free up money for the member? Is the loan officer looking to do more than just act like an order taker?

As community-based economic cooperatives, we have to be the ones who listen and look a little harder at the person in front of us.

This article was originally published for CUES SKYBOX. Please visit their blog for other great credit union articles. 

Helping Our Members Live Up to Their Privileges

A Tale of Privilege
While attending a conference a former airline pilot related the following story to me. A man's lifelong dream was to board a cruise ship and sail the Mediterranean Sea. He dreamed of walking the streets of Rome, Athens, and Istanbul. The man worked diligently and saved every penny until he had enough for his passage. As his funds were limited, he brought an extra suitcase filled with cans of beans, boxes of crackers, and pouches of powdered drink mix, and that is what he lived on every day.

The man watched the others take part in the many activities offered on the ship—working out in the gym, playing miniature golf, and swimming in the pool. He envied those who went to movies, shows, and cultural presentations. He yearned for only a taste from the tables heavily laden with all the amazing food he saw on the ship. Every meal was by itself a feast! However, the man merely looked on and did not participate as he wanted to spend as little money as possible. He had used almost all his money on the ticket for the voyage. While he was able to see the cities he had longed to visit, for the most part of the journey, he stayed in his cabin and ate only his humble food.

On the last day of the cruise, a crew member asked him which of the farewell parties he would be attending. It was then that the man learned that not only the farewell party but almost everything on board the cruise ship—the food, the entertainment, all the activities—had been included in the price of his ticket. Too late the man realized that he had been living far beneath his privileges.

This story struck me when I heard it. I thought of so many of the people I come in contact with at credit union events who are so passionate about the world of credit unions and the value they add to their membership. Yet, we often spend our time on efforts that are driven by external forces like; free checking, lending volumes, or new legislation like the Durbin Amendment. We spend so much time saying the country needs credit unions but fail to really help our members understand just what their "ticket" for their cruise bought them. It was then I realized that membership had its own set of “privileges”. I could not help but wonder if many of us are like the person in the story.

The Man In The Story Sparked the Experiment
Many of us will conclude that I am speaking about the man who had not realized his privileges until the end of the voyage. I do think that part of the story is sad. However my focus is on the crew member who told the man of his privileges. If only he had spoken to the gentleman earlier. If only he had made it a point to greet each new passenger as they boarded the ship and had given them a flyer explaining the privileges that are part of being a passenger on the ship. If only somebody had cared enough to simply ask a question earlier in the voyage.

This sparked an idea that I wanted to try. So I pulled one of my best member service specialists and asked them to pilot a question for me. I wanted her to ask every member she interacted with what their favorite credit union membership privilege was. She was somewhat skeptical at first fearing that the members would not know what she meant by “privileges”. In fact on the 2nd day she emailed me the following as I was driving to a CUES chapter meeting, "My manager and I were discussing the verbiage. Could we change the word to benefits? Saying – Mr. Member, what benefits do you appreciate and utilize the most being a member/owner with the credit union? Or – What benefits do you find the most valuable to you being a member/owner with the credit union? PS. Don’t text me back while driving!”

I email her back (no, I wasn't driving – I was lost with four other credit union leaders in a minivan wondering if we would ever find a major road with a road sign again) and asked her to keep trying with the word privilege.

That word conveys something that people want to know about. What sounds more exciting to you, “Thanks, for joining our pool membership here are the features and benefits of your membership” or “Thanks, for joining our pool membership I want to make sure you are aware of the privileges you receive with your membership.” Now, maybe it is just me – but I want to know about my privileges!

The next day during lunch I check my mobile and get the following email from her, "Just wanted to let you know we have been getting fabulous feedback on all the conversations and we've been able to turn negative responses into positive ones by educating the member on whatever their dilemma is and have even been able to open some new accounts and insurance and investment referrals.”

What had happened was that most members when asked what their favorite privilege was could not answer the question. This then led the member service specialist to then explain other products or services associated with the credit union like investment advisors or credit union auto buying service. This is so much more powerful as a transition phrase from service to sales than the typical, “before I let you go” statement we all here all too often in from our staff.

Practical Application:

• So how are your passengers doing on your ship? 
• Are they sitting on the sidelines wishing they could enjoy eating at the table? 
• Does your staff find them in time for them to enjoy the voyage? 
• As our members are trying to make it through the financial storms that are looming on the horizon what actions could your staff take this week to help your membership understand the privileges that are theirs? 

Send this link to a credit union employee you know. Strike up a conversation with them on what question could they ask that would help your membership grab hold of the potential to improve their financial well being by really participating with your credit union.