Archive for the ‘rates’ Tag

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

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 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.