Guest Post: Credit Union Outsider

This is a guest by the not-so-anonymous Bill Grizack. Bill is Managing Director of BrightLeaf Financial Network, a CUSO whose mission is to bring technology-enabled financial planning and advice solutions to the average credit union member. Bill is responsible for developing BrightLeaf’s high-level strategic direction and managing the CUSO’s direct sales effort. He can be reached at bill.grizack@brightleaffinancial.com.

Credit Union Outsider

I have been working with credit unions for the last five years or so.  I don’t work at a credit union, nor have I ever worked at a credit union.  My job is to sell online financial planning services to credit unions.  That said, I have been keenly observing credit union behavior and rhetoric all along the way.

My frustration with credit unions in general, and leadership of credit unions specifically has been growing for five years, and is now at a boiling point.  Someone needs to snap these guys back to reality.  I guess this is my attempt to do so.

At heart, I believe in the credit union mission.  Every credit union I have spoken to or visited (over 500 or so in the past five years) has a mission something like this – “Our credit union’s mission is to improve the financial lives of our members.”  This is a mission I believe in.  Unfortunately, I have yet to experience this on any mass level.  For the few of you that live and breathe this mission, I applaud you.  For the rest, I say, quit deluding yourselves and get to work.

The behavior I have witnessed and been subjected to leads me to think that the real mission for credit union’s should read: “Our credit union’s mission is to improve the financial lives of our members, as long as it means we don’t have to take any risks, change our behavior whatsoever, spend any money or put out any additional effort.”  Harsh, I know.  I have a motto – “It’s not a value judgment, it’s just true.”

Let me defend my argument using the typical credit union rhetoric.

Credit Unions are better because we are about people not profits.

In the 2009 J.D. Power & Associates study in retail banking, they asked consumers to rate their current primary financial institution on their overall satisfaction.  To be specific, below is the JD Power definition of overall satisfaction:

Overall Satisfaction: This score is based on how customers rate their overall experience with their current primary financial institution.

By this measure, we can certainly declare the winner of who consumers think are the best financial institutions from a customer service perspective.  Below is a breakdown by region of the number of credit unions in the Top 10:

Region # of CU’s in Top 10 Region # of CU’s in Top 10
Mid-Atlantic 0 Southeast 0
Mid-West 0 Southwest 0
Mountain 0 West 0
New England 0 Nationwide 0

That’s right, not one credit union was ranked in the Top 10, in any region of the US.  If you say you are about people and not profits, yet consumers do not rank you first among financial institutions, what are you really doing or saying.  This point of rhetoric is a farce.  The statement “people not profits” implies that the banks (and all other for profit entities) are scumbags, yet, consumers find the banks tops in customer service.  Just because you are nice, does not mean that you are about people.  On top of that, are the folks that work in bank branches mean?

Credit unions are better because we offer the best rates.

There are a number of rate ranking systems out there, so I chose bankrate.com as an industry benchmark.  For the last six (6) months, below is a list of credit unions by product type that rank in the Top 10 for best (lowest for loans and highest for deposits), taking into account fees:

Product # of CU’s in Top 10
Mortgages: 0
CD’s: 0
MMA & Savings: 0
Auto Loans: 0
Credit Cards: 0
Checking Accounts: 0

Two for two credit unions.  Not one credit union ranked in the Top 10 for any product set.  So if you are returning your profits to members in the form of better rates, and yet you don’t rank in the Top 10 for rates for any product, how are you better again?  Oh yeah, you are nice.

Credit unions are better because we offer the best services.

In a Forrester Research study of Consumer Ranking of Financial Institutions performed in 2008, consumers were asked to rank financial institution services based on factors like convenience, usefulness, cost, etc.  Below is the a table that shows the number of credit unions in the Top 10 (again by region):

Region # of CU’s in Top 10 Region # of CU’s in Top 10
Mid-Atlantic 0 Southeast 0
Mid-West 0 Southwest 0
Mountain 0 West 0
New England 0 Nationwide 0

At this point dear reader, you should be noticing a pattern.  As you break it down further, the Forrester survey did not list one credit union in the Top 10 for best branches, most convenient ATMs, best online banking, lowest fees, closest branches, knowledge of staff or call center access.  Best service?  Yes, yes I forgot, you are nice.

The list of rhetoric points does go on, and as you dig in you find that credit unions do not perform.  Another example – looking at the same JD Power and Associates study I mentioned above, not one credit union is ranked in the Top 10 for having the lowest fees.  Credit union rhetoric says that credit unions are better because they have the lowest fees.  I don’t think so.

The counter argument to all of this data is that in aggregate, credit unions have the lowest average fees and the best average rates.  This is true on average, but what this argument neglects is access.  A consumer does not have access to the average rate, only access to the financial institutions in her area.  A better measure would be a weighted average of rates (or fees) based on access to those rates (or fees).  Of course no one in the credit union industry has done this analysis.

Now that the rhetoric is out of the way, and sufficiently debunked (at least in my opinion), what should credit unions be talking about that would be something we could all talk about?  I think the answer is staring credit unions right in the face, every time they walk into their own lobbies.  If credit unions were to actually try to live up to “Improving the financial lives of their members,” then that would something remarkable for us to all talk about.

What would “Improving the financial lives of their members” look like for the credit union industry?  I will take a run at that below:

  • Every single member of every single credit union gets a target goal plan and a target spending plan.
  • Each member gets access to not the best rates, but the best set of products to help them achieve their target goal plan and target spending plan.
  • Members get access to relationship pricing that gets them better rates the more business they do with their credit union.
  • Each member of a credit union gets access to best in class delivery channels that work for them – call center, branches, online, etc.
  • Members of credit unions get a refund check each year equal to their fair share (by product relationship) of the credit unions profits at the end of the year.
  • Every single member of every single credit union gets a review of their target goal plan and target spending plan every year.
  • Rinse and repeat – and be nice about it.

If credit unions don’t adjust, my belief is that they will be marginalized even further in the financial industry.  They have a noble mission.  It is time to live up to it.  At least that is what this credit union outsider thinks.

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13 comments so far

  1. Denise Wymore on

    Bill,

    I love every bullet point you set out for us, but just wanted to clarify one that is a pet peeve with me. Relationship Pricing. Many credit union have relationship pricing that punishes the low-aggreegate-deposit member (and yes, can you believe we use the word aggregate in our marketing materials?) and does absolutely nothing to reward the high-aggregate-balance member – unless they are big money order users cuz every credit union I’ve seen waves that fee for the $50K plus member. Whoopee.

    Instead, credit unions need to truly reward the members that contribute the most to the cooperation with a system like PoinTracs.com. A version of the airlines frequent flyer program for credit unions. If you only fly occasionally – you don’t get any perks. If you fly a ton – think PFI – YOU get to choose the perks you get. The loyalty is rewarded. Rinse and repeat.

    Cheers and thanks for this post.
    Felt good reading it – can only imagine how good it felt to write it.

  2. Steve on

    Were credit unions included in the J.D. Power study? I did not even see any listed in the ratings which might help explain why none of them made the Top 10.
    http://www.jdpower.com/finance/ratings/retail-banking-ratings

  3. EK on

    According to the American Consumer Satisfaction Index, the credit union industry score is 84, compared to 75 for banks. If credit unions are simply “nice,” apparently consumers want “nice.” Or maybe there is something more significant going on.

    CUNA reports this rate comparison: http://www.creditunion.coop/ratedex.php
    Similar data has been confirmed by recent coverage by national news networks (CNN, etc). Credit unions are outperforming banks in all but 30 year FRMs. With your “access” argument, shared branching, shared ATM networks, and online banking make this argument nonsensical. At this point, it is a preference issue, not an “access” issue.

    6 of the top 10 in the Forrester study were insurance companies. The report included: “Other customer-owned organizations continue to score well, including credit unions and Vanguard.” The study “evaluated 41 leading US banks, brokerages, and insurers;” so the conclusions that you draw may be a little grandiose compared to the scope and observations of the study.

    When comparing industries, I am uncertain why you chose only to look at the “Top 10” in a couple studies as your litmus test of the above statements. I don’t believe you’ve “debunked” the validity of any of these.

  4. Sam Brownell on

    I contacted J.D. Power about the “Retail Banking Ranking”and they said that their ranking does not include credit unions, which pretty much undermines your entire argument.

    Here is their response:

    Mr. Brownell,

    Thank you for your e-mail. The J.D. Power and Associates 2009 Retail Banking Study does not include credit unions. The study analyzes customer satisfaction with the retail banking experience based on six factors: transactions; account statements; account initiation/product offerings; convenience; fees; and problem resolution.

    Thank you for your interest in J.D. Power and Associates. Please let me know if you have any further questions.

    Best Regards,

    Melissa Healy

    Corporate Communications

    J.D. Power and Associates

  5. Denise Wymore on

    Okay,

    I think y’all missed the point of this post and are splitting hairs now.

    (read that with a southern accent).

    Anyway – this is the credit union’s time. This recession is probably the best thing that could happen to us right now – banks are marketing FOR us every single day. We are not evil like they are – in theory – we are nice – but it takes MORE than that to really capture the hearts and minds of consumers today.

    Re-read the bullet list of what credit unions should do today – do you disagree?
    Let’s really live our mission. Not just frame it and put it on the board room wall.

    That’s what I think this is about – ratings shmatings – who cares? It’s what you do for your members that matters….

  6. Ondine Irving on

    I loved reading this post! I’ve been part of the Credit Union industry since 1985 and worked all facets. Don’t get me wrong, I love credit unions, love my clients and yes, I do like “nice”…however-

    My two cents is the bureacracy and policial machines that exist within the industry has resulted in the overall lack of awareness in America about credit unions. Yes, there are 95+million members, but we remain a fraction of bank assets and customer base.

    The national Credit Union organizations/associations/leagues have, in the past, done very little to help Credit Unions attain the national exposure they deserve. Without that exposure, CUs miss out on the ratings. Associations are too busy trying to compete with each other, as with NAFCU and CUNA in the recent Huffington Post article! Who has the better Credit Union locator? Who are you kidding? (CUNA has the better CU locator by the way!). Yes, there were even some associations that were trying to prevent CreditCardConnection.org from taking off! Wow! Perhaps because they did not think of the idea? Hmmmm….

    It took a bank crisis by default to get credit unions in the limelight! Not to mention a few tweets! 😉 The political self-serving interests of all these credit union associations has resulted in a never-ending bureacracy that has ultimately intefered with the potential national exposure that credit union’s should have been receiving for the past 25+ years.

    But not to worry, that has changed now, and it is certainly by no effort of our CU Associations. I can continue to cringe when I see dueling national associations duking it out for limelight in the national media.

  7. Ron Shevlin on

    While I think that raising the JD Power survey doesn’t help you make your case, Bill — I don’t think CUs were included, and if you would have seen Forrester’s surveys, you would have seen the CUs have consistently been ranked #1 on a measure I would argue is more relevant than satisfaction, namely advocacy (doing what’s right for the customer, not just the bottom line — I would agree with your core point.

    I think that the core of the problem is this: There is a disconnect between CU’s missions and their business models. CUs are trapped in banks’ business model.

    If you make your money selling financial products (like banks do), than you’re not necessarily fulfilling your mission of helping people manage their financial lives. Because sometimes they don’t need YOUR product. Often, what people need is not another product, but advice and guidance about managing their financial lives (I’m not talking about asset allocation, here — I’m talking about everyday cash management, budgeting, etc.). But nobody in the industry makes any money from that. And the reality is that while CUs may be not-for-profit, they’re also not-for-loss.

    I don’t see the solution to this as a particularly easy one. But I do think that someone will come along who will charge for advice and guidance and give away the underlying transaction account. This is the exact opposite of what banks — and yes, CUs — do today.

  8. Matt Hand on

    Hi Bill,

    What I like about your post:

    1) You clearly are passionate about providing the best financial education and guidance for credit union members.

    2) The goals you want CUs to set for improving the financial lives of CU members are ambitious. I’m a huge fan of challenging ourselves with lofty targets. We should never rest on our laurels and be content with our current performance. We can always do better and should never stop improving.

    3) You defined a roadmap for CUs to live up to one of the most commonly held beliefs in their mission statements. A definitive way to enable members to “improve their financial lives”.

    What I don’t like about your post:

    1) It exaggerates credit union weakness. As a member who got a CU auto loan in December 2008, I saw a clear distinction between banks and CUs. Banks were having such a liquidity problem that month that they would not lend to my wife and I. Only BB&T called us back and offered 5.5%. The dealer offered us a loan at 6.5%. And, 2 credit unions offered the loan at 5%. One of the CUs was Arlington Community FCU, which is the lender we chose.

    2) Besides the J.D. Power survey not including credit unions, as noted in several comments above. Bankrate.com does not list credit unions in their mortgage or credit card rate rankings. As per this page on their site ( http://www.bankrate.com/finance/mortgages/bankrate-com-averages.aspx ) they only factor in the 10 largest banks and thrifts in 10 large U.S. markets for mortgages and the 50 largest card issuers in calculating credit card rates.

    In conclusion, it’s hard enough reading misleading facts and data from ABA operatives, but to see them coming from a credit union ally is disheartening. I think you should focus on your positive ideas and look for examples of credit unions living up to your expectations. A letter like that would resonate well with all of the industry, and would probably get you closer to your stated goal.

  9. […] • Guest Post: Credit Union Outsider « The CU Skeptic […]

  10. Clay Yearsley on

    You sound like someone who has swung and missed on your sales efforts to CUs and has become disgruntled.

    You make some good points, but you don’t have a grasp on what many credit unions already offer – for example, your bullet point on relationship pricing.

    Your bullet points all sound like something that could be addressed by technology-enabled financial planning and advice solutions.

    Oh, wait, that’s what your company sells, isn’t it?

    I have to admit, blogging it and getting it on the CU Water Cooler blog has been a more effective marketing strategy for you than a cold call or direct email marketing. I did at least read the blog.

  11. jim blaine on

    About the post, Mr. Grizack should be thankful that creit unions are nice….

  12. Matt Davis on

    Things I admire about this post: the guts to write it, the honesty to put your name on it, and the resolve to inspire credit unions to improve the relationship between our message and our performance.

    Things I do not admire about this post: the other comments sum that up much better than I can.

    The truth is that there are credit unions that are simply not doing a great job of fulfilling their mission. The truth is also that many credit unions are doing a fantastic job. After visiting 500 of the roughly 7,900 credit unions in America, I would imagine you have a decent feel for the ratio of either case to the other. I would also imagine that you realize that your assessment is quite divergent from public opinion.

    As is the case with any pitch or proclamation, the urge to generalize and exaggerate never fails to get your argument dismissed…no matter how close you are to a sound case.

  13. Anonymous on

    I actually used to work for a credit union that claimed everything they did was “for the members,” yet the thing they pressed the most on employees was cross-sales. If you didn’t make your goal, even by one referral, you were written up. Three write-ups and you were terminated. I can understand why they’re important, since the credit unions need to turn some profit, but the way it was pursued was ridiculous. We were written up for not offering a credit card to members who had large balances ($100k+), got in trouble for not asking about auto loans (even if the member had just been asked the day before); one of my coworkers even began outright begging members to get a product/service. I was part of a committee that oversaw several branches in my district, so when I saw the lengths employees were going to in order to get referrals, I spoke up and said “something isn’t right about this.” I was encouraged to write a letter to HR detailing what I had been seeing, so I did. As a result, I was asked to resign for “not being a good fit” for my position and spent six months on unemployment. Sales and turning a profit are important, yes, but I think they’ve become more important than the individuals who make the companies function (i.e. the employees and members).


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