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T H E ON LY A LL-DIGITA L ALL-B USINESS R ESOUR CE FOR CR ED IT UNIONS THE MOBILE BANKING ISSUE APRIL 2017 VOLUME 12 ISSUE 4 Making Noise with a Silent Ad Campaign EVA LAMERE ALSO IN THIS ISSUE Defining Accurate Base Pay Compensation and Its Importance for the CEO JERRY P. NELSON ABOUT US THE ONLY ALL-DIGITAL ALL-BUSINESS RESOURCE FOR CREDIT UNIONS PUBLISHING TEAM Tim O Hara Editor & Publisher tim Patti Manzone Designer UP FRONT Tim O Hara CU TRAINING Kenneth C. Bator MARKETING Bruce A. Clapp IN-BRANCH PRODUCT SALES Nick Brown CFO CURRENCY Robert Perry and Jason Haley COOPERATIVE GOVERNANCE Jerry P. Nelson MARKETING MATTERS Eva LaMere COMPLIANCE UPDATE Bambi Helm AT C LEVEL Marc Bringman LENDING SOLUTIONS Rex Johnson SUBSCRIPTIONS Credit Union BUSINESS is published monthly (12 issues per year) by CU Business Magazine Inc. A one-year Digital membership is 75 yr An online membership form is available at register. TEAMBUILDER https the-teambuilder SALES AND ADVERTISING Tim O Hara Publisher tim or 561-282-6015 1 CONTACT INFORMATION Credit Union BUSINESS Magazine P.O. Box 2223 Palm Beach FL 33480 (561) 282-6015 (561) 588-7711 (fax) tim 2 C R E D I T U N I O N B U S I N E S S A P R I L 2 0 1 7 C U B U S I N E S S . C O M Ashok Kumar Associate Publisher ashok TH E ON LY ALL- D IGITAL ALL- BUS IN ES S R ES OURC E FOR C RED IT UN ION S THE MOBILE BANKING ISSUE APRIL 2017 VOLUME 12 ISSUE 4 Making Noise with a Silent Ad Campaign EVA LAMERE ALSO IN THIS ISSUE Defining Accurate Base Pay Compensation and Its Importance for the CEO JERRY P. NELSON TABLE OF CONTENTS APRIL 2017 VOLUME 12 ISSUE 4 TAB THE ONLY ALL-DIGITAL ALL-BUSINESS RESOURCE FOR CREDIT UNIONS What does a G ISSUE THE LENDIN ISSUE 9 9.95 VOLUME 9 JANUARY 2015 Suze Orman ons Tells Credit Uni It s Your Time Managing Risk in 2015 ding Bank Execs Hea to Credit Unions sophy Change in Philo is Key to Success 75 subscription buy Informative monthly magazine. Website with 72 back issues 700 articles available On Demand RaNC thE B IN h BUS RaIN ESS t SUE INg IS volUm JUNE 2014 6 9.95 E 9 ISSUE RESOURCE FOR CREDIT UNIONS THE ONLY ALL-DIGITAL ALL-BUSINESS THE MOBILE BANKING ISSUE 4 APRIL 2017 VOLUME 12 ISSUE Making Noise with a Silent Ad Campaign EVA LAMERE thE E-Comm ERCE I S S U EDefining ALSO IN THIS ISSUE lending tools for a New generation of homeowner eMortgages by Keith Kelly may 2014 volUmE 9 ISSUE 5 9.95 Accurate Base Pay Compensation and Its Importance for the CEO JERRY P. NELSON All The CU g) (CU Trainin Stars cy) Paul Nunn Hollis (CFO Curren liance Update) Emily More rson-Kapke (Comp Ande Jennifer (CU Mobile Mortgage) Keith Kelly s (CU CEO) James Collin (Lending Solutions) son Rex John k (CU Content) Laura Enoc Dios (CU Outreach) Miriam De by Roy W. Urrico Credit Unions Keepin g Up With Banks for Mobile Banking Services Products Per House hold What Does it Mean to Your Staff by Jack Kelly 6 8 12 17 21 Way The Best nches Bra to Build ock is to Kn wn Them Do s Collins by Jame UP FRONT Paper vs. Digital Publishing Digital Wins EveryTime Tim O Hara CU TRAINING 24 29 32 34 37 COOPERATIVE GOVERNANCE by Laura Enock Nunn Jennifer Hollis Paul Emily Mor from left Rex Johnson Top row James Collins Miriam De Dios Middle row Laura Enock Bottom row Anderson -Kapke Keith Kelly ing The Chang siness Bu Face of Lending Defining Accurate Base Pay Compensation and Its Importance for the CEO Jerry P. Nelson MARKETING MATTERS Eva LaMere Those Darn Millennials Kenneth C. Bator MARKETING Making Noise with a Silent Ad Campaign COMPLIANCE UPDATE Integrating ROI into Everyday Marketing Bruce A. Clapp IN-BRANCH PRODUCT SALES Nick Brown Preparing for an Uneventful Compliance Audit Bambi Helm AT C LEVEL Leading Your Sales Culture from Reactive to Proactive CFO CURRENCY The Mistake Marc Bringman LENDING SOLUTIONS Rex Johnson A Classic Approach to Investing Robert Perry and Jason Haley Turning a 700 Score into an 800 Score 5 C R E D I T U N I O N B U S I N E S S A P R I L 2 0 1 7 C U B U S I N E S S . C O M UP F R ONT BY TIM O HARA Paper vs. Digital Publishing I Digital Wins Every Time was surprised to be reminded that it s already been four years since Credit Union BUSINESS magazine switched from a high-quality printed magazine to a high-quality digital magazine. Wow time flies And what a difference a digital format makes When we launched CU BUSINESS in mid-2005 we chose a heavy stock paper with a Velox coating. It looked and felt very rich. The shiny varnish took an extra two days to dry before shipping but for a long time the higher quality seemed to justify the wait. And the wait was extended because the printing process itself took about one week from the time the physical files were sent to the printer to the time the postal workers transferred the 20 to 30 boxes of magazines from the printer to the nearest postal facility. Then began the sometimes two-week journey through the network to readers physical mailboxes. Most of the time the information was three to five weeks old by the time our readers first picked up the magazine to flip through the pages. By comparison we can now make last-minute changes to a finished pdf copy of the current issue and download the file to a website called which is located in New Zealand. Literally within one minute we have a high-quality page-turning e-magazine link that is ready to upload to Constant Contact for instant delivery to our 10 000 subscribers. What a difference it makes when you can save half a year on magazine delivery And it s a global effort I sometimes say that my second-luckiest day following a Christmas Eve night many years ago when I met my wife Tierney was the day six years ago when we contracted with a company in India to perform our back-office work. It was then that I was assigned a young man by the name of Ashok Kumar to be my point of contact. 6 C R E D I T U N I O N B U S I N E S S I never had to tell Ashok anything twice. But after a few months he moved far away to New Delhi to find new opportunities and we lost contact. His former company offered me several more representatives none of whom measured up to Ashok and I ended the business relationship soon thereafter. One day many months later I received a LinkedIn request from Ashok Kumar of India. I immediately hired him and he has grown to become the Associate Publisher of CUB. He is now responsible for complete digital programming including the magazine and website design as well as implementation and keeping track of our growing paid circulation lists. Yet another advantage of our digital publishing platform is our new feature called CU Business OnDemand. Because we have kept a library backlog of more than 60 issues we have literally hundreds of articles stored on our website. Right now we are in the process of cataloging and organizing each article under its working classification Lending Marketing Technology Compliance Leadership Cooperative Governance Training and Branching. Here is a sample of our new signage featuring On Demand. ON DEMAND So now our paid subscribers receive a wonderfulcollection of digital offerings including the high-quality digital magazine and an extensive website with hundreds of back articles they can call up On Demand all for the low subscription cost of just 75 per year If you are reading this and are not yet a paid CU BUSINESS magazine member I urge you to join today because very soon all of our important Credit Union BUSINESS information will be for members only. Thanks for reading Tim A P R I L 2 0 1 7 C U B U S I N E S S . C O M Experience the Power of Plus. Let Advisors Plus guide your path to optimization and growth. The Power of Problem Solving The Power of Potential The Power of Profit With 200 years of industry experience our consultants have been there fixed that. We combine experience with analytics to identify high-impact growth opportunities. We create high-ROI results you can take straight to the bottom line. The Power of Partnership Our team works with your team on products and marketing to delight your members. Bring your credit union to the Plus side Call 727.299.2535 or visit us at CU TR AI NING BY KENNETH C. BATOR Those Darn Millennials When it comes to capturing the business of the Millennial crowd credit unions may feel as though they re darned if they do and darned if they don t. But engaging this generation isn t as fickle as might be expected. Although they may define it differently financial success is still key to these young folks engagement. If you want to market to Millennials you better darn well know how to engage the Millennials that work for you. That was my response to a question during a webinar on branding I facilitated for VirtualCorps. com back in 2015. The question was How can we attract more Millennial members The point I wanted to get across was that it is near impossible to create an attractive member experience for people between the ages of 20 and 35 when the credit union employees of that age aren t fully engaged. No one knows that better than Todd Romer founder of Young Money University. Todd has been teaching the Millennial generation about wise money management practices for several years now. I had the pleasure of hearing him speak twice in 2016 first during the 13th Annual Police Officers Credit Union Conference and then later during the annual Southern California Credit Union Alliance Conference. I was able to catch up with Todd a few weeks ago about how to better engage Millennial employees and members. Their level of engagement really boils down to giving them some pathway to knowing what it takes to be financially successful stated Todd about his experience with the Millennial market. They are trying to figure out Will I be successful long term given the economy given the job market and given their student loan debt. They are wondering if they will be as successful as their parents. Many think I d like to be more successful than my parents and I m anxious about that. So to engage with Millennials is all about giving them a to-do list as to what it means to be successful with money. That really resonates with Millennials as they want more of a coach. They re not interested 8 C R E D I T U N I O N B U S I N E S S A P R I L 2 0 1 7 C U B U S I N E S S . C O M CU TRAINING in talking to someone individually at a bank about their financial future. They don t want that traditional financial-advisor feel. They want a realistic and simplistic tell-me-what-to-do (approach). Todd spoke of the hopes and dreams of Millennials. That led to a discussion between the two of us on how the situation for someone in his or her 20s today isn t that much different from when he and I were in our 20s. I shared with him that when I was about 25 I was what I call argnorant a combination of arrogant and ignorant. Fortunately for me in the early 1990s I had multiple people who mentored me on what to do and what not to do to be successful. As I discuss in my session Navigating Through Generational Generalities I believe there are two aspects of life today that exacerbate the normal friction between folks in their 20s and those in their 50s 1) The fact that we have gone from the Industrial Age to the Information Age has made it more difficult for Baby Boomers and Millennials to connect. I m sure that during the transition from the Agricultural Age to the Industrial Age there was a 52-year-old telling a 22-year-old Son you need to stop tinkering with that crazy machine and start planting some seeds 2) I believe that the biggest unreported casualty of the Great Recession is mentoring. Businesses think they have learned how to do more with less even though I would argue we are less productive as a society because of that mentality. Instead of having a supervisor manage five to seven people he or she is given a team of 12 or more. Then organizations reward the best leaders by adding four more problem-children to their staff saying You re good with people. You can handle them. Even the best managers with a true desire and skill to mentor their employees are so physically and emotionally spent that they quickly downgrade to feeling These Millennials just don t get it. I totally agree with that Todd responded. The media may have pigeonholed the entire Millennial generation in that they are entitled and that they want everything yesterday. Sure there [are] some natural elements to that in the age of social media and the ability to quickly communicate. There s some reality there but it s no different than when I was 25 and I wanted things to happen quickly. I may not have been as patient as others. Human nature comes into play regardless of generation. Todd reiterated that while Millennials don t necessarily want to talk one on one they are open to information and being led down the right path. They would like to have what they are used to seeing whether that be short videos webinars or even email content to be able to learn from thought leaders in certain areas he said. From a credit union perspective one of the best ways to engage with Millennials is to be seen as their money coach. Credit unions have a wonderful opportunity to be those guides but they need to deliver the information and content that Millennials are seeking in the ways that they want it. In other words TURN ON YOUR TRAINERS 4 CU withTEAMBUILDER. TRAINING C U B U S I N E S S . C O M teambuilder buy 9 C R E D I T U N I O N B U S I N E S S A P R I L 2 0 1 7 CU TRAINING Todd suggests providing something other than the typical banking experience. Todd also had some suggestions in terms of content for short videos and webinars targeting the Millennial market. Provide guidance on student loan debt and how to eliminate it over time. Also teach how to conquer the fear of investing. Educate this group on what the stock market is. Let them know what types of products are available to them like mutual funds and ETFs. Just educating them that investing and gambling are two different things is important. Teach those fundamental diversification dollar-cost averaging and historical rates of return concepts. A credit union can really get to the heart mind and soul of that Millennial by digging a little deeper into why they ultimately want to be financially successful. Get to know what their story is now and what they want their story to be later on in life. A credit union can be that guide. In summary credit unions have a golden opportunity to differentiate themselves from the traditional financial advisory role. As I tell many of my clients when it comes to marketing to their members make it all about them. Communicate in a manner that is unique to the Millennial market in terms of financial services. There s so much general financial information out there expressed Todd. Banks and credit unions aren t necessarily messaging in the best ways to that market. A small tweak in that messaging can certainly increase engagement. When we began talking about examples of organizations that seem to really engage and mentor employees in their 20s we began sharing examples. We talked briefly about Starbucks and the benefits they provide such as student loan reimbursement. However Todd quickly segued to Enterprise Renta-Car. Enterprise Rent-a-Car is one of the largest recruiters of college graduates in the country. They have a very strong Millennial workforce. Enterprise employees have a sense of We re going to go above and beyond we re going to have fun and we re going to do the best job we can for our customers. 10 C R E D I T U N I O N B U S I N E S S As fellow road warriors in our consulting and speaking careers Todd and I shared stories of how we have been really pleased with Enterprise Rent-a-Car. They have energy that seems to come from the top that trusts their Millennial staff he said. Enterprise gives their employees some big responsibilities. They seem to train very well and create a culture of winning and fun at the same time. I use Enterprise Rent-a-Car almost exclusively when I travel. As a raving fan I believe many credit unions could learn from their business model and culture. Credit unions can also learn from Todd. So I asked him As credit unions build their strategies to earn business from Millennials what are the top tips you suggest to CUs He offered two ideas 1) Have a desire to know their story and where their story wants to unfold. If a credit union can really show an interest in being a part of a Millennial s life story [it has] a real opportunity to engage with that market. There are so many of them that respectfully want to do life differently than their parents. They want to have less money worries. Credit unions can really separate themselves from banks by being someone who wants to know where their story is now and where they want to end up. So be that guide for them. 2) Offer sub-accounts where Millennial members can put names to them. Many people don t even know this exists. When I teach Millennials that you can have sub-accounts and label them to track where every dollar goes the eyes of attendees light up. Many credit unions offer multiple share accounts. Multiple-name savings accounts are a big deal for this demographic. It s about doing money differently. Great tips from a fellow thought leader and author. My conversation with him reminded me of what a mentor of mine told me when I was 24 and starting my career with my first credit union We can t be just another vendor. If you want to market to Millennials you can t be just another financial institution. A P R I L 2 0 1 7 C U B U S I N E S S . C O M CU TRAINING Ken Bator is the author of The Formula for Business Success B C S and the founder of Bator Training & Consulting Inc. (BTC). Ken helps credit unions create environments where employees actually want to come to work and members want to keep coming back. BTC accomplishes this through a combination of branding culture building and strategic planning. This is the unique B C S Formula created by Bator and featured in his latest book. Contact Ken directly at 714-681-2821 or kbator Learn more about BTC s session on Navigating Generational Generalities at www. or profile kenbator . Don t let this valuable offer pass you by. C R E D I T Jump on the CU BUSINESS Express to help your credit 11 union GROW for your members employees and U N community. E S S I O N B U S I N A P R I L 2 0 1 7 C U B U S I N E S S . C O M Sign Up Your Entire Crew for Team Builder MA R K ET I NG BY BRUCE A. CLAPP Integrating ROI into Everyday Marketing Return on investment (ROI) isn t something your credit union examines willy nilly. Ideally it should be used every single day. For marketing purposes your CU should be calculating ROI at three distant intervals. Read on to find out what these key timeframes are and how they can help your CU better manage and plan. W e all know about the importance of ROI (return on investment). It plays a central role in budgeting planning execution and evaluation. It is vital for marketing and for ensuring that our investment of marketing funds generates the highest possible impact for the credit union.. However the toughest part of ROI is using it every day. You know the calculations the return (or benefit) of an investment is divided by the cost of the investment and the result is expressed as a percentage or a ratio. For marketing you should be using ROI calculations at three distinct intervals Pre-program to ensure the expenditure you are contemplating will yield sufficient results Mid-program to ensure you are tracking with your projections Post-program to ensure you have captured the true program performance Each interval tells us important information that helps us manage and plan. Pre-Program When resources are scarce and every dollar counts assessing a program s value prior to launch and using the projected ROI to determine the path forward will maximize your budget and impact. I encourage you to set an ROI floor that is your go no-go level. Anything below does not move forward anything above continues through the assessment process. However there will be times when a projected ROI does not meet a standard yet you will move forward with the program due to its role in brand awareness etc. This will apply to only a small number of programs but they are potentially important ones. 12 C R E D I T U N I O N B U S I N E S S A P R I L 2 0 1 7 C U B U S I N E S S . C O M THEY SAY... GOOD THING. We make it great. Cummins Allison self-service coin counters can transform the way your branch manages coin. Customers enjoy a quiet convenient and easy-to-use coin-redemption experience while you see tangible bottom-line benefits. With multiple machine choices and hands-free coin-management programs your staff can spend more time interacting with customers. Increase branch traffic enhance customer loyalty and improve teller line efficiencies. It s a small change that can make a big difference. Simple yet effective branch automation technologies from Cummins Allison build branch traffic and allow your staff to focus on what matters most more meaningful engagement with customers. CHANGE is a MAKE A CHANGE AT traffic TAB MARKETING Mid-Program This is one of the most important and underutilized times to generate an ROI. During a program a marketer will often be more concerned with the tactical execution than with actively tracking the ROI. It is critical to actively track the results AND the ROI during a program. Doing so allows you to make midprogram course corrections or changes or to simply stop a program that is not producing. These are tough evaluations and decisions but they will yield credibility within your organization. Nine out of 10 programs will continue forward but do not be afraid to cancel something mid-stream if it is simply not producing the desired action from the members. FreeStar Financial Credit Union was born. The credit union felt that operating results could be better with a new brand. Challenges CMCCU was originally established in 1957 at what is now the Selfridge Air National Guard Base. In those days it was known as Selfridge Air Force Base Credit Union. In its early years the credit union s members consisted of military personnel and supplemental staff at Selfridge Air Force Base. In 2014 CMCCU was approved for a nine-county geographic expansion and a statewide military member expansion. Suddenly the Central Macomb Community Credit Union name became geographically restrictive. The CU wanted a new brand and name that would reflect a progressive future and a chance to broaden its member scope while maintaining and celebrating its military heritage. The challenge was ensuring an ROI to match the investment in the change. A complete financial impact analysis was created to chart the opportunity and potential. Research Based on a positive projected ROI the following actions were taken A financial analysis was completed and evaluated. The CU s branches and competitive locations were shopped to gauge experience. Staff members were interviewed to o Identify potential hurdles. o Identify strengths and weaknesses. o Identify front-line opinion of member perceptions and personality traits. Brand strengths and competitive messaging were analyzed. Member interviews were conducted to obtain a deep-dive understanding of their use brand perception and need. Core data was analyzed to understand member usage patterns and opportunity gaps. 14 2 20 01 17 7 C U B U S I N E S S . C O M Post-Program This is the point at which most people perform ROI calculations. Post-program evaluations should track the numerical impact the quality and quantity measurements and the complete ROI. Detailed notes about the program and learnings made along the way will help you the next time a similar program is needed. Broadly sharing the results good or bad will generate confidence in the marketing team and will show leadership across the organization. A successful ROI is a team effort... share the kudos Following this path will give you confidence in your control of the information needed for ROI and the expected outcomes. No more guessing and hoping. We are bringing more science into our art known as marketing and integrating your ROI process into everyday thinking will broaden your success. ROI A Credit Union Case Study The mid-Michigan financial marketplace is highly competitive and when Central Macomb Community Credit Union (CMCCU) realized that its brand and positioning were no longer aligned with the scope of its member base possibly posing an impediment to growth it reached out to MarketMatch for help in creating a new name brand and positioning. Thus C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S A AP PR RI IL L MARKETING TAB A market survey of non-CMCCU members was conducted to gain blind awareness purchase criteria and financial need. Member households and product usage were mapped to gain a top-down view. Market analysis site selection research and location potential inquiries in the expanded nine-county marketplace were conducted. Tracking measurements were established and implemented. Solution While the CMCCU name had little brand equity the organization had many strengths. The analysis of our research confirmed that a new name was the right step to take. A New Tagline Take Your Dreams Higher The new tagline Take Your Dreams Higher perfectly complements the new name as the word higher resonates with the star in FreeStar. The tagline pays off the promises (freedom guidance peace of mind) implicit in the new name with its very aspirational if you dream it we can help you do it message. Post-Program Results The new FreeStar Financial brand was launched on April 4 2016 and the initial results from the rebrand (year-over-year comparison 2015 to 2016) are nothing short of WOW Incremental Growth DDA (Checking) 2015 DDA (Checking) 2016 Loan Balances 2015 Loan Balances 2016 Deposit Balances 2015 Deposit Balances 2016 New Members 2015 New Members 2016 443 540 10 535 709 11 714 365 4 800 000 9 300 000 790 955 21% Incremental Growth Closed Accounts 2015 Closed Accounts 2016 15 A New Name FreeStar Financial The name FreeStar Financial salutes the credit union s military past and is geographically neutral. FreeStar is also rich in positive connotations such as freedom aspiration guidance navigation and success. Without question the star is one of the most iconic meaningful symbols in this country. As a celestial image it can signify the many aspirations and dreams the credit union s members want to reach. As a symbol associated with navigation the star can speak to the guidance and clarity the credit union provides. Finally as a salute to the CU s military history the star stands for freedom and bravery. The yellow and black elements conjure an image of a plane which is a nod to the CU s Air Force military roots. The combination of the yellow black and gray colors represents the credit union member and community coming together and working as a team. 22% 11% 94% 543 497 8% C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S A AP PR RI IL L 2 20 01 17 7 C U B U S I N E S S . C O M TAB MARKETING Knowing that a positive ROI was projected and [that] tracking [was] put into place for monitoring the results we felt very confident in our rebrand process. The final post-program results exceeded our initial expectations and goals enthuses Drema Isaac president and CEO of FreeStar Financial Credit Union. Summary Follow these key practices and techniques for not only calculating an ROI for your marketing efforts but also evolving that ROI into a true planning tool to be used in everyday decisions. Once you have communicated with your CEO and management team you are on the road to ensuring that everyone begins to perceive each marketing project as not just another expense but rather a true investment in the organization. Using ROI every day will help your CEO have more confidence that marketing is a valuable investment Bruce Clapp aka High Voltage is THE vision and energy that drives everything MarketMatch a marketing consulting and strategy firm he started in 2002. And while much of that power is fueled by Red Bull (we re talking he has a fridge next to his desk) it s also fueled by his 25 years of marketing expertise in various executive credit union and bank marketing leadership positions. While very outspoken about his love of family and anything Ohio State Football Mr. Clapp is quieter about some of his hidden talents like being able to juggle and shoot a 3-point shot He s inspired by making a difference big or small in the lives of others and loves watching Gold Rush on the Discovery Channel though he admits MarketMatch and his employees are his own personal gold strike. Bruce can be reached at baclapp 16 2 20 01 17 7 C U B U S I N E S S . C O M C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S A AP PR RI IL L IN - BRA NC H PRODU C T S A L E S BY NICK BROWN Leading Your Sales Culture from Reactive to Proactive C Is your credit union stuck in a reactive sales rut Switching to a proactive sales approach with your members could keep business at your credit union that would otherwise go elsewhere. Keep reading to see how such a shift helped one credit union s production and loan growth skyrocket. redit union sales is a passion of mine. This is why I left my very comfortable credit union career a few years ago and started Nick Brown Consulting a credit union specific sales consulting and training company. But it wasn t always this way. In fact early on in my career I had a very different perspective on sales and the role sales played in the branch. While still in my first credit union position as a teller my focus was not on selling but rather processing. I remember one memorable performance review I had. I had failed to meet my lofty sales goal (six product sales p month) 10 out of the previous 12 months. When asked about this lack of success by my managers I responded simply I process transactions I am not a salesman. What I came to understand later and what completely changed my perspective was that credit unions sell to serve. In fact if credit union employees are not reaching out and selling to their members they are not truly serving the members needs. One credit union I ve worked with this past year which has come to this understanding as well is Salt Lake Utah-based American United Federal Credit Union. At nearly 200 million in assets and 20 000 members American United is the product of a series of mergers and strategic partnerships over the past decade. The 17 C R E D I T U N I O N B U S I N E S S A P R I L 2 0 1 7 C U B U S I N E S S . C O M conglomeration of this family of credit unions has created a lot of growth and has given them an amazing presence in the Salt Lake area market. But growth in numbers hasn t necessarily translated into greater opportunity. One of our goals has always been to grow membership through mergers but there has always been a subset to that goal to develop the relationship with each of those members as well says Brittany Anderson director of marketing and member development with American United. Through our mergers we were gaining new members however the relationship piece was missing. We realized that we weren t reaching out to them to try to develop each relationship provide them the service and products they needed and show them how we can benefit their financial situation. By IN-BRANCH PRODUCT SALES not developing those relationships we ended up losing many. Anderson goes on to say We successfully offered specials but the more and more promotions we offered the more we realized we weren t seeing the success that we should be. We were pushing out information and displaying nice-looking marketing and graphics but what we were missing was the relationship on the front lines to capture and close the business that the marketing brought in. We realized that we were in a very reactive state of mind only helping the member with exactly what they were asking for. What American United was experiencing with its reactive sale state of mind is the same for many other credit unions. This reactive sales approach is sometimes referred to as Order Taker. In a reactive (or order taker) sales mode the credit union will get to only the financial need services the members ask for leaving them underserved. And without guidance from employees the credit union will often find its members with products and services spread out amongst a number of financial institutions rather than only with the CU. Reactive sales cultures generally develop on their own where efforts have not been made on the part of leadership to provide sales-specific training coaching and accountability to sales goals. Generally employees in a reactive sales model see sales as a bother to their member and will avoid sales discussions. The order taker approach does not engage members and ends up giving them permission to look elsewhere for their financial needs. 18 C R E D I T U N I O N B U S I N E S S So how do credit unions who are stuck in this reactive sales approach make the change Anderson says for her CU it started with leadership. It seemed like a change was occurring in the way leadership was thinking about our approach. We started talking more and more about sales and realized within our credit union that we really needed to shift that culture on our front line from being reactive to proactive. Like American United leaders of credit unions who are stuck in this reactive sales approach need to recognize that a change must take place before a switch to a proactive approach can happen. Once the decision has been made they need to take action and provide a few things. American United started trying a few things to get employees to see themselves as salespeople. The CU began by implementing an incentive program to encourage cross-selling and it started running monthlong sales competitions that were built around the marketing promotions. It worked too. During those months when the contests were being held Anderson says it produced so much more than her credit union A P R I L 2 0 1 7 C U B U S I N E S S . C O M IN-BRANCH PRODUCT SALES TAB had been doing in the past. Unfortunately though the success typically lasted only as long as the contest and then it was back to business as usual. We really needed some structure to keep us going throughout the year. We were missing that level of organization in our sales efforts to help our front line realize who to reach out to and what the cross-sale opportunities were for each member. For American United it was easy for employees to focus on one area and sell the smaller products and services. But it was still very difficult for them to engage the member in a discussion to learn what that member s true financial needs were and find a way to solve them. It took some time Anderson says to help our front line realize that when a member is requesting a signature loan for example that it was up to them to make sure a signature loan offered the best solution to [the member s] financial needs. Often when studying the member s credit report and specific financial situation we can see that by using equity from an owned vehicle or other collateral [that member] may have we [are] able to offer a better rate and lower payments while still fulfilling the original need of a loan. The next step for American United would be to provide credit union specific sales training. To that end a full day of class training was first delivered to branch managers loan officers and cross-trained tellers. Following the training these individuals were each given sales-specific leads and goals to immediately start calling and to help them apply what they had learned right away. To support the training the credit union s newly promoted sales manager and trainer made monthly visits to branch staff to follow up and where needed to coach and retain the content trainees had received. With training complete and employees challenged to start making sales calls to discuss products and services with members right away Anderson says the credit union saw immediate results. 19 C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S A AP PR RI IL L 2 20 01 17 7 C U B U S I N E S S . C O M IN-BRANCH PRODUCT SALES What was interesting was that we had immediate success. The numbers we saw from that first month were better than we could have hoped. To go from one end of the spectrum from a reactive culture to the opposite end of the spectrum striving to be proactive was amazing and our loan production skyrocketed. More and more of our branches started reaching their goals and eyes started opening. It showed employees that by identifying the opportunities that really benefit that member s finances the number of products and services per household increased. It really gave us that confidence we needed to say Okay yes this is going to be successful so now we can put our full resources behind it. This training rolled out in January of 2016 and the success continued through the year. In 2015 American United s loan growth was a little more than negative 3 percent. The CU s team finished with a positive loan growth of 14 percent just over a 17 percent turnaround. But this success didn t come without a price. Not all of the employees who received the training were able to make the adjustment to the new sales approach. It s been interesting to see the shift in mentality. I think that shift can be a really hard one for someone who s been doing the same thing the same way for a really long time. We did have a few people who just could not equate sales with service and never felt fully comfortable and they eventually left. Like American United other credit unions I have worked with also see immediate results from their sales training. One of the keys for sustaining that sales success throughout the year has been the continued coaching employees are receiving from the sales manager and trainer. With employees receiving continued support coaching and encouragement from this individual and from their branch leadership they are staying accountable and consistent. Credit unions exist to be their members primary resource for financial products and services and to be their members financial advocate. The employee must be the one who reaches out to the member to offer 20 C R E D I T U N I O N B U S I N E S S options and solutions the member s needs. Some may call this sales which it definitely is. American United has a different name for it. What we have seen along the way is that by being proactive for our members showing them how we can benefit their financial picture and not necessarily just giving them what they think they need or what they are asking for we are simultaneously providing excellent member service. Nick Brown Consulting established and founded by Nick Brown in 2015 is a credit union specific sales training group dedicated to bringing a proactive sales approach to every credit union. Nick Brown Consulting accomplishes this aim by providing sales consulting and training to enhance branch sales outbound sales and lending center sales. With an emphasis on lending and cross-sales Nick s goal is empowering credit unions to add value in the life of every member in every interaction. Engage Nick Brown directly at 714-6812821 and nick Ask about his credit union specific workshops and online sales training featured at A P R I L 2 0 1 7 C U B U S I N E S S . C O M CFO C UR R E N CY BY ROBERT PERRY AND JASON HALEY A Classic Approach to Investing Far above any individual decision the decision-making framework is crucial to a credit union s long-run investing success. And analytical models are a key element of such a substructure. Keep reading for a data- and research-oriented framework that will set your CU on the path to sound portfolio decision-making. credit union s investment portfolio serves an important role within the overall balance sheet management process. And regardless of the portfolio s objective (liquidity income etc.) our ultimate goal should be to maximize return per unit of risk taken. For many financial depositories the individual(s) responsible for managing the investment portfolio wear(s) many hats but generating reasonable risk-adjusted returns requires discipline and focus amid an ever-changing market economic and regulatory landscape. To that end a credit union should have a well-defined investment process that involves much more than just looking at bonds. Long-run institutional investing is sometimes like watching paint dry a little boring and a little routine. For success it s important to be patient and have a sound research-oriented and well-defined investment philosophy. In other words the decisionmaking methodology we utilize will contribute much more to long-term performance than the individual decisions themselves. Yet some institutions make many of their investment decisions based on what they are being shown by their brokers. Brokers provide a necessary service but in the end they simply offer the ingredients to a recipe that has already been developed. Imagine managing a two- or three-year duration portfolio for 50 years you re making hundreds and hundreds of fairly routine decisions. This is what makes the decisionmaking framework or investment process much more 21 C R E D I T U N I O N B U S I N E S S A P R I L 2 0 1 7 C U B U S I N E S S . C O M A important than any individual decision and it is the crux of this article. The Investment Process A Framework for Sound Portfolio Decision-Making Institutional fixed income portfolio management is best thought of as a rinse and repeat process in which portfolio riskiness is increased when compensation for risk is high and vice-versa. For example if yield spreads and expected returns on corporate bonds or mortgage-backed securities (MBS) are low portfolio weights and exposure to these assets would also be low. As spreads widen relative to U.S. Treasuries or interest-rate swap rates exposure is increased. A dataand research-oriented framework combined with TURN ON YOUR CFO and CEO 4 CFO withTEAMBUILDER. CURRENCY teambuilder buy CFO CURRENCY sound trading level analytical models arms today s successful fixed income managers with the ability to address portfolio management in a very controlled manner. Individual security selection can be thought of as the raw materials for portfolio returns. And as a best practice consider relative value analysis using robust trading level analysis in an option and credit-adjusted framework. example we might see monthly top-down themes combined with daily security selection weekly risk analysis and monthly performance reporting. Duration targeting and interest rate risk management take the guesswork off the table. Notice there s no discussion here on the direction of rates or when the Fed is going to move. Interest rate forecasts rate bets and trades that are explicitly positioned for a specific interest rate change have no Exhibit 1 displays a portfolio management Exhibit 1 process that begins with an assessment of the overall balance sheet risk profile. In particular the securities portfolio should be managed within an ALM framework which accounts for the balance sheet s existing relationship between the asset and liability risk profiles. Arguably most important is interest-rate risk managing the duration of the portfolio such that the duration of equity is either mitigated or targeted appropriately is very important. However other considerations such as liquidity risk credit risk and earnings needs also come into play. Depository investors don t manage their investment portfolios in a vacuum and the portfolio duration target should be developed in such a framework. Once portfolio objectives are established it s important to ensure that the guidelines policy allow for successful implementation of the strategy. If they aren t aligned the depository s place in this process and often can cause portfolio portfolio manager is limited in his her ability to deliver managers to rue the day. Instead portfolio performance comes from good old-fashioned risk measurement and long-term performance goals. From here top-down market themes lead the way management as well as sector and security selection. through the investment process. Top-down themes communicate the current assessment of various market Exhibit 2 shows this relationship graphically. The line metrics and risk factors which drive sector allocation in the sand is clearly drawn between option- and creditdecisions. Security selection risk budgeting and risk embedded assets and their other simpler cousins. It s best to evaluate callable bonds using a lattice measurement bring us to the finish with ex-postapproach while given the path-dependent nature of the performance evaluation. Actively managed fixed income portfolios are prepayment option MBS are better evaluated using at some stage of this feedback loop at all times. For Monte-Carlo simulations. Interest rate and option 22 C R E D I T U N I O N B U S I N E S S A P R I L 2 0 1 7 C U B U S I N E S S . C O M CFO CURRENCY Analytical Models and Why We Need Them It s vital for credit unions to have analytical models to identify and measure risks and potential returns. In today s dynamic fixed income markets the need for robust models increases with the complexity of the assets or asset classes being evaluated. models should price observable market instruments accurately and be arbitrage free and prepayment models should exhibit a best data fit approach. Without these tools investors are unable to properly evaluate the market pricing of such assets. Of course we can t forget the popular phrases model users beware and use models at own risk. There are plenty of historical examples of financial models leading investors to their early demise. Models are only as good as the assumptions that go into them requiring an investment in the human capital needed to properly manage robust analytical systems. So proceed cautiously understand the inputs and assumptions and absolutely positively be critical of outputs. That s why feedback loops are such an important component of the overall investment process. Models can help us make decisions but they are not the end-all be-all. To help navigate today s financial environment a growing number of credit unions are turning to experienced external advisors both for expert guidance 23 C R E D I T U N I O N B U S I N E S S and to outsource specialized functions like investment and balance sheet advisory. An institutional asset manager can provide the tools and resources (both systems and human capital) needed to build and maintain high-performing bond portfolios at a fraction of what it may cost to attain those resources internally. When seeking outside counsel on investing credit unions must understand how that advisor is compensated (e.g. fee-based or commission) and performance must be measured relative to the stated portfolio objectives. That said a thoughtful and disciplined investment process should lead to more consistent and predictable earnings from the fixed income portfolio. Robert Perry Principal ALM & Investment Strategy Jason Haley Managing Director Investment Management Group ALM First Investment Advisors Dallas Tx 2 0 1 7 C U B U S I N E S S . C O M A P R I L CO OP E R ATI V E GOV E R NA NC E BY JERRY P. NELSON Defining Accurate Base Pay Compensation and Its Importance for the CEO What are the components that go into a thorough CEO compensation strategy If your credit union strives for a foundation built on soundness and value to both members and staff you ll want to listen up. These three components will ensure the implementation of a compensation policy that yields such a structure. n prior articles we have discussed the need in fact the necessity to articulate a thorough compensation policy. While it might be as simple as saying We want to pay at market in actuality it requires drilling down much deeper to provide effectiveness competitiveness and establishment of a sound and valued credit union structure (in all things). Let s examine some of the components that fit into such a policy or strategy Pay Below Market This strategy or policy is rare and it generally works only if there exists a very aggressive bonus plan to offset the lower base pay. As an example the CEO might agree to base pay that is only 80 percent of market but with an opportunity to make it up plus more by hitting pre-approved bonus metrics. With agreement by all parties this strategy can work. Another sometimes used argument is that the credit union provides a very rich benefit program thereby justifying a lower base pay. From our experience this rationale rarely works and can be fraught with problems benefits mean differing things to I 1) Compensation Policy Specifics While policies can be general their impact is extensive. The challenge is to find the best fit for not only your credit union but also your CEO. Today we ll break down one of the most common compensation policies (establishing fair CEO base pay) and provide some detail and analysis concerning how to deal with it. TURN ON YOUR COMPLIANCE A) Policy Question 1 In comparison to the marketplace where should we index or link our CEO s base pay The choices are Base pay lower than market Base pay at market Base pay above market 24 C R E D I T U N I O N B U S I N E S S OFFICER withTEAMBUILDER. 4 COMPLIANCE UPDATE teambuilder buy 2 0 1 7 C U B U S I N E S S . C O M A P R I L COOPERATIVE GOVERNANCE different people but pay speaks loud and clear to everyone. Recommendation Employ this strategy only if the bonus plan can make up the difference and the CEO is totally on board with it. [Bonus plan construction will be discussed in a subsequent article.] Pay at Market This is the most common approach. Why It is easy to justify. There exists an abundance of data available for accuracy and it is defendable to all parties. Recommendation Use this approach ... unless 1) you are confident in your abilities to construct an effective plan to justify paying base pay less than market (as discussed above) or 2) a severe need exists to justify paying more than market (discussed below). Pay Above Market This approach is not really that common but when used reflects the Board s belief that paying above market will provide an edge in hiring the best or retaining the best. Such a strategy is also implemented when there are factors that require paying above market to attract qualified candidates. Some of the factors that might bear on such a decision are unpopular destination challenging working conditions unusual or severe credit union problems etc. The challenge comes in knowing how much above market will work. Most employees (including CEOs) will not leave a credit union (assuming they are relatively happy) to tackle a tough situation unless the increase is significant probably more than 15 to 20 percent. Recommendation Use this approach only if necessitated by workforce conditions that require going above and beyond the scope of normal compensation practices. Paying the CEO higher within the pay range might be a better solution. 25 C R E D I T U N I O N B U S I N E S S 2) The Importance of Establishing Fair CEO Base Pay (The term fair pay is used here to denote competitive justified and policy-compliant base pay.) Having established a compensation policy or philosophy the next step is determining what that base pay looks like. The importance of paying the CEO fairly and competitively is far-reaching for a number of reasons. First and probably foremost in the thinking of most Boards is CEO retention. If you have a good CEO you will certainly want to keep him or her. If you won t pay your CEO competitively someone else will is an often used phrase that not only is true but can also be incredibly painful. The task of searching for and hiring a new CEO is arduous and expensive. Headhunters are not cheap nor is the cost of downtime in trying to find that right fit. And that right fit almost always comes at a cost that exceeds what would have been sufficient to retain your current CEO (a phenomenon that strangely occurs more often than not). Second fair and competitive CEO pay sends an important message to the CEO that he she is well thought of by the Board and is regarded as a most treasured link in the credit union s success now and in the future. We call this psychic income and it simply conveys appreciation and respect to the CEO for doing his or her job in an effective manner. Interestingly psychic income doesn t cost any more than just paying the CEO fairly but the message is vital. Third fair CEO pay prevents compensation compression with the other executives or senior staff. Let me illustrate. While working with a 2 billion credit union over 30 years ago the Board was comfortable paying their CEO well under market. Their rationale was that Jim was being paid well (in their minds) and he was such a good old boy that he d never leave the credit union. Well in this particular instance that was totally true Jim loved the credit union had been there for over 30 years and he never would leave. But Rick the EVP and heir-apparent would leave as well as A P R I L 2 0 1 7 C U B U S I N E S S . C O M COOPERATIVE GOVERNANCE three or four of the other key SVPs. Their salaries were being compressed (below market) by the low pay of their CEO and had this aberration not been corrected what would have happened to the credit union s management would have been devastating. 3. The Components of CEO Pay A) Base Pay With a plethora of reliable survey sources and 990 data available (including TruComp990) the challenge is not so much in an ability to obtain data as it is to be able to analyze the data. A few suggestions I. Index data as closely as possible to the asset size of your credit union. While this task sounds easy on the surface it can be somewhat problematic in practice. Many times salary data is provided in large ranges of asset size (say 500 million to 1 billion or 1 billion to 2 billion). A Board may find it difficult to determine what the best asset category fit is. If as an example a credit union is barely into an asset category range should it move to the higher category or should it stay (for a while) in the lower category A couple of possible solutions Try and find sources that might drill down more closely to your credit union s actual asset range. (TruComp990 data can provide that closer and more accurate view.) Alternatively develop a policy that might say When the credit union falls into the next asset category the CEO will automatically become 26 C R E D I T U N I O N B U S I N E S S A P R I L 2 0 1 7 C U B U S I N E S S . C O M COOPERATIVE GOVERNANCE TAB part of that category (higher). Another option is choosing to implement a time restraint. The credit union must be in the new asset category at least one year before the compensation structure will change. Having an asset category policy relieves confusion uncomfortableness and possibly hurt feelings. II. Index data to the most relevant geographic location. Every location within the United States has a geographic index that is a composite of wages for that location and the cost of living there. Such an index is typically displayed as a percentage of the national average. As an example data collected on a national basis is a melting pot of all of that data it reflects the national average (100 percent). However if your credit union resides in New York City or San Francisco (as examples) those salaries will be upwards of 25 percent more than that average. The opposite is true of many of the southern states where their geographic index is often less than 90 percent of the national average. Sometimes credit unions may have branches in different cities within the same state or even different states. In such cases the geographic index could be vastly different. This variation will be of significant importance when hiring retaining or transferring employees to different locations. III. Pay grades are generated based on the midpoint value of the market data (typically at the median of the collected data). Pay grades are then crafted with a minimum and maximum value (the control points). To maintain the integrity of the pay grade employees pay should always fall between those two control points. Pay grades or ranges especially for CEOs and other executives need to be of sufficient breadth to allow for effective and strategic movement or placement within the range. While many pay grades have ranges of between 35 to 50 percent 27 C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S A AP PR RI IL L (minimum to maximum) CEOs (and executives) should be higher 60 percent to 75 percent. This allows the Board the flexibility to reward high-performing CEOs (who may also be well experienced) without restricting their base pay because of a limited pay grade ceilings. At the same time it affords them when needed the ability to hire the right CEO without worries of violating the integrity of the pay grade. This provision isn t intended for all employees or for those not performing at high levels. It is intended for CEOs who are doing their job very well as evidenced by their performance review scores and stout credit union financial performance. B) CEO Pay With market-sensitive pay grades constructed the question that many times troubles Boards is Where within this pay grade should our CEO be paid This is not always an easy question. In fact it often creates a great deal of angst. Let me list a couple of thoughts. I. CEOs are CEOs for a reason they are very good To be promoted to a CEO position previous performance had to have been stellar and demonstrated results at the highest level. With that in mind CEOs if not at the midpoint of the pay grade should be elevated to that level fairly rapidly. It s okay for new CEOs to be under midpoint for a season (while they are proving their abilities to the Board) but that season needs to be relatively short two to three years at the most (unless performance problems surface). II. Once at midpoint the CEO s salary movement should be based on an aggressive merit matrix that combines A) Leadership Performance B) Credit Union Financial Performance C) Member Service Feedback and D) Strategic Initiative Attainment. Pay grades organically move each year based on inflation or other market conditions. So the merit matrix must 2 20 01 17 7 C U B U S I N E S S . C O M COOPERATIVE GOVERNANCE not only reflect the organic movement but also provide additional percentages of merit pay that are motivational for high-performing CEOs. III. Lastly periodically review peer groups. Check the pay of peer group CEOs (easily available from TruComp990) to determine if your CEO s pay is competitive and relevant. Assuming all things are equal in terms of credit union performance if the CEO has a compa-ratio of 100 percent while the peer group average is 110 percent you may find yourself in a less than competitive posture and it may require some compensation action. I ve asked Board members on several occasions What is the most valuable position in the credit union Many times the answer is Our tellers our member service reps or loan officers. While all of these positons are important they are all clearly secondary to the most important position that of CEO. The CEO is the definitive leader the coach the captain the motivator and the foremost champion of the credit union. By ensuring proper CEO compensation the Board is making that statement loud and clear In subsequent articles we will discuss the intricacies of CEO Bonus Plans and effective CEO Performance Reviews. Jerry Nelson was the founder and CEO of HRN Management Group (HRN). Initially founded in 1989 HRN grew from a small local HR company to an internationally known consulting firm totally more than 3 000 domestic clients (located in every state) and eight countries. HRN s client list while serving small to medium to Fortune 500 companies embraced organizations in virtually every industry. That list included the financial industry (credit unions banks and mortgage companies) insurance industry biotech firms clinics and hospitals the entertainment industry gaming manufacturing pharmaceuticals and service and public firms of every stripe. HRN developed and pioneered several on-line HR products that remain frontrunners in the market place to this day Performance Pro HR Suite Job Descriptions Plus Succession Pro and in concert with Clinton Koker Compease. Jerry has worked extensively with Executive Management teams and Boards in developing and implementing strategic compensation and management systems to affect their journey in becoming high performance organizations. 28 C R E D I T U N I O N B U S I N E S S A P R I L 2 0 1 7 C U B U S I N E S S . C O M MA R K ET I NG MATTE R S BY EVA LAMERE Making Noise with a Silent Ad Campaign Rebranding a local community credit union is not something to take lightly. Shifting the public to a totally new image can be more complicated than it might seem. See how a well-executed strategy that was clearly thought out in advance made a new identity seamless for one CU. rebranding campaign can be a tricky affair fraught with the potential for failure and negative impact to the client (see Gap Coke). Scary as that sounds a poorly executed rebranding of an established institution can yield even more destructive results if you re a local community credit union that is changing its name entirely. Breaking with the established and familiar identity of the past can be jarring for long-time members especially those who have an affinity for the established brand. It also requires a clearly thought out and well-executed strategy to shift to a new public image. So when Oceanside Christopher asked us to refresh their nearly 47-year-old brand our strategy to reposition them as Ocean Financial Federal Credit Union came with a laser focus on communicating that while the name may have changed the values of the Catholic credit union were as rock solid as ever. First some background Ocean Financial headquartered in Oceanside N.Y. provides financial products and services to the Catholic community. Chartered in 1969 by a small group of members at the Father Joseph O Connell Knights of Columbus (Council 3481) today it is the fourth largest Catholic credit union in the country with more than 14 000 members and 314 million in assets. A In order to capture the attention of Ocean Financial accountholders and potential new members alike we took an unconventional approach for an institution that had mostly relied on a local cable access channel parish communications and word of mouth to spread their message. We created a series of video spots titled Silent Heroes that celebrate the values of the Ocean Financial community and appeal to a broader prospect base. These spots presented fictitious characters in familiar situations who step forward to make a difference in the lives of the people around them. We were confident in the vision we presented to the client Our research confirmed there was no other credit union in the area utilizing a similar marketing TURN ON YOUR MARKETERS MATTERS withTEAMBUILDER. 4 MARKETING teambuilder buy 29 C R E D I T U N I O N B U S I N E S S A P R I L 2 0 1 7 C U B U S I N E S S . C O M MARKETING MATTERS TAB strategy the video vignette. So we were able to present a strategy that allowed Ocean Financial to stand out from the crowd and prominently present its new brand to its audience. The spots which were produced in 30-second and 60-second versions were booked to air on local cable TV and were uploaded to YouTube allowing for digital streaming of the videos. In the first spot titled Hoops with a Heart the coach of a basketball team of elementary school-aged children notices one of his players is wearing sneakers that are old and ragged. He takes it upon himself to purchase a new pair of sneakers with an Ocean Financial branded credit card and surprises the boy by placing the sneakers in his gym locker before a game. The spot ends with the smiling boy joining his teammates on the court wearing the new sneakers. In the second spot titled Cooking for Good a volunteer at a community soup kitchen sees the critically important commercial stove give out stopping meal service to the people who depend on the generosity of the center for food. The volunteer visits her local Ocean Financial branch to secure a loan for the purchase of an upgraded replacement stove to serve the needy people who depend on the facility for a daily meal. Both spots end with the voiceover Isn t It Time We All Spread the Love which is based on a research-defined brand truth created for OFFCU. It centers on the nonprofit financial institution s Catholic AWARENESS ACQUISITION ASSET GROWTH IDEAS THAT INSPIRE ACTION MARKET SHARE We re the financial marketing experts who can help your credit union stand out from the pack attract new members and deepen relationships with existing ones. What defines success for your brand ADVERTISING BRANDING DIGITAL 877 . 730 . 2210 AUSTIN-WILLIAMS.COM AUS493_AW_PR_1675x1203_4C_v4.indd 1 6 15 16 4 53 PM 30 C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S A AP PR RI IL L 2 20 01 17 7 C U B U S I N E S S . C O M MARKETING MATTERS Ads can be viewed here https playlist list PLuqSJR6nKTHqxEFtZtLaUmVBv5umyVmnj values which drive a deep respect for the people and community the CU serves. The positive results were immediately apparent with the client endorsing our vision and our execution. These are fictional stories but we ve known members who have done similarly generous things said Joseph Garay CEO of Ocean Financial. It s a terrific expression of who the Ocean Financial family is and the way we support each other when someone needs it. The ads are currently running on targeted local cable stations during primetime network programming including A&E AMC HGTV and CNN. They have also been published as online pre-roll served to targeted geographic and demographic audiences. Just weeks into the rollout the campaign has already started to turn heads. It has also succeeded in bringing the mission of the Ocean Financial community to life by demonstrating an example of the values they live and breathe every day. We ve even had peer credit unions call us saying they noticed the rebranding said Garay. They told us our approach was perfect. Pushing the envelope with clients is only half the goal. You need to know what direction you re pushing and make sure it s always helping them drive their business forward. Eva LaMere is president of Austin & Williams a fullservice marketing digital and public relations firm located in Hauppauge N.Y. 31 C R E D I T U N I O N B U S I N E S S A P R I L 2 0 1 7 C U B U S I N E S S . C O M CO MP L IAN CE UP DAT E BY BAMBI HELM Preparing for an Uneventful Compliance Audit Examiners are raising their expectations of compliance audits. Will your credit union meet them Doing so ensures your CU maintains its trustworthiness in the eyes of current and potential members alike. These best practices will prepare you for a stress-free compliance audit so you can keep your reputation intact. E xaminers exist to ensure the safety and soundness of your credit union. It is also their responsibility to ensure processes are in place to protect consumers. Today regulators are turning up the heat to make sure consumers can 100 percent trust the credit unions they do business with. Over the span of my career I ve experienced countless exams and have seen the steady increase in regulations and heightened scrutiny by examiners to ensure financial institutions are in compliance with those regulations said Lenny Swanger director of audit services at Centris Federal Credit Union. Compliance Audit Best Practices Audits support the credit union s compliance commitment and effectiveness which in turn supports the safety and soundness of the credit union. When preparing for an audit whether it will be conducted by your own internal personnel or an outside partner there are three best practices that will set your auditor up for success. 1. Establish clear expectations. 2. Provide documentation early. 3. Be open to findings. Establish clear expectations. If a credit union is just now establishing a compliance management system (CMS) and needs to evaluate the current state of compliance conducting a full suite of audits may be especially effective. However many credit unions find that a deeper dive on the areas they determine are of greatest concern or risk yields more effective outcomes. Talk with your auditor or auditing team to set clear expectations and priorities from the outset. Is an examiner coming in to look at a particular area Have you uncovered concerns and need to determine if you truly have an issue Perhaps you ve found you need to test established controls on a scheduled timeframe based on your residual risk rating. Share that information up front and set a timeline for completion that both you and the auditor agree is doable. 32 C R E D I T U N I O N B U S I N E S S A P R I L 2 0 1 7 C U B U S I N E S S . C O M COMPLIANCE UPDATE TAB What does a G ISSUE THE LENDIN ISSUE 9 9.95 VOLUME 9 JANUARY 2015 Suze Orman ons Tells Credit Uni It s Your Time Managing Risk in 2015 ding Bank Execs Hea to Credit Unions sophy Change in Philo is Key to Success 75 subscription buy Informative monthly magazine. Website with 72 back issues 700 articles available On Demand RANC THE B IN H BUS RAIN ESS T SUE ING IS VOLUM JUNE 2014 6 9.95 E 9 ISSUE RESOURCE FOR CREDIT UNIONS THE ONLY ALL-DIGITAL ALL-BUSINESS THE MOBILE BANKING ISSUE 4 APRIL 2017 VOLUME 12 ISSUE Making Noise with a Silent Ad Campaign EVA LAMERE THE E-COMM ERCE ALSO IN THIS ISSUE I S S U EDefining by Keith Kelly Lending Tools for a New Generation of Homeowner eMortgages MAY 2014 VOLUME 9 ISSUE 5 9.95 Accurate Base Pay Compensation and Its Importance for the CEO JERRY P. NELSON s All Star The CU Paul Nunn Hollis (CFO Curren liance Update) Emily More rson-Kapke (Comp Ande Jennifer cy) g) (CU Trainin by Roy W. Urrico Credit Unions Keepin g Up With Banks for Mobile Banking Services Keith Kelly s (CU CEO) James Collin (Lending Solutions) son Rex John k (CU Content) Laura Enoc Dios (CU Outreach) Miriam De (CU Mobile Mortgage) Products Per House hold What Does it Mean to Your Staff by Jack Kelly Way The Best nches Bra to Build ock is to Kn wn Them Do s Collins by Jame ing The Chang siness Bu Face of Lending by Laura Enock Nunn Jennifer Hollis Paul Emily Mor from left Rex Johnson Top row James Collins Miriam De Dios Middle row Laura Enock Bottom row Anderson -Kapke Keith Kelly Provide documentation early. Not handing over all the policies procedures training manuals etc. up front can cause delays in your audit process. If an examiner is on the way you will have a timeline you want to follow. Giving your auditing personnel what they need to be successful will ensure you have your report in hand well before your deadline. Be open to findings. Issues that prompt unscheduled audits are often the tip of the iceberg. Be prepared for the auditor to discover other areas that need your attention. Don t become overwhelmed. A good auditor can assist you in creating a plan of attack. The Disrpution More People Should Be Thinking About There is so much talk of disruption in the financial services industry. Typically those conversations center on product innovation and competitive threats. Not as many are focused on the upheaval of increased examiner scrutiny. Yet the cranked-up pressure is creating just as much disruption if not more within the industry. Many credit unions have already experienced higher expectations from the examiners who are visiting their cooperatives. And the stakes of failing to meet an agency s rules are getting higher. With the right strategic auditing plan in place however credit unions will continue to impress examiners as the type of financial institutions that put consumers first. Bambi Helm is director of audit services for regulatory compliance firm PolicyWorks. She oversees the endto-end delivery of compliance audits and reviews to credit union clients ensuring the audit programs are current consistent and efficient. Reach her at bambih A View From The Outside A byproduct of a thorough compliance audit is a review of your credit union s CMS. Auditors review policies procedures management oversight and compliance structure as they check off their technical compliance lists specific to an audit. Regulators want more structure around compliance and the outside perspective can often find gaps in that structure. Missing items or inadequate processes and controls are easier to spot when you perform hundreds of audits on all different sizes and types of organizations. That is why many credit unions are beginning to find greater value in audit assistance from an outside partner. 33 C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S A AP PR RI IL L 2 20 01 17 7 C U B U S I N E S S . C O M AT C L EV E L BY MARC A. BRINGMAN W The Mistake hen a failed recovery effort lands a young team leader outside the general manager s office all he can do is sweat bullets and contemplate a jobless future. The dreaded talk with his superior however will reveal an important lesson one that extends out of the workplace and into real life. Not every disaster is what it seems. Harry sat quietly outside the general manager s office. Although he had met the GM he had never been invited to his office. Even though he was wearing his best suit Harry knew he looked terrible. Failure and a lack of sleep tend to foster an especially haggard appearance. He hadn t slept the previous night at all and for the last several weeks he had been lucky to get two hours a night. Harry was about to pay for a mistake. Several weeks earlier one of his team leads discovered a devastating problem with their billing system that serviced millions of credit card accounts. Harry remembered the meeting well. The news had been so disturbing that he grew increasingly ill as the technician explained the problem. The technician summarized with these words Harry this has been happening for the last six months and it continues to happen with lightening speed even as we speak. The system had been under billing accounts for at least six months. Harry remembered thinking that his first thought was an odd one He just had to say at lightening speed didn t he Harry led the recovery team and members expressed many concerns at the first team meeting. The fix would be easy but recovering the unbilled revenue looked to be very complex. The difficult task required examining every account to determine if the account had been affected and if so calculating an adjustment amount for each of the previous six months. Furthermore every customer would need to be notified and that effort would create a customer relation s nightmare. 34 C R E D I T U N I O N B U S I N E S S A P R I L 2 0 1 7 C U B U S I N E S S . C O M The team s first thought was to write off the money as a quick and efficient way to recovery however senior management immediately nixed the idea--it was just too big a loss. Recovering the money became the goal. The most senior technicians were very concerned about the complexity of the recovery process and warned anyone who would listen that they were engaged in very risky activity. On top of it all management demanded immediate 24 7 action until the problem was resolved. Many of Harry s recovery team were worried about keeping their jobs--a thought that had also crossed Harry s mind at least twice an hour every day and more frequently at night amidst the few dreams he had. For the next 21 days the team worked 70-hour weeks preparing modified software that calculated the adjustment amount notified each customer and created the necessary reports. Although Harry and his team were exhausted they were sure they had an effective routine in place. Testing looked good and on the following Monday they went live. The production changes ran fine and the first bills showed the expected adjustment. Customer bill inserts and letters proceeded on schedule. Then almost five weeks later Elsie showed up at Harry s office. Harry I ve got a problem. Elsie s eyes spoke volumes and warned Harry that she had bad news. AT C LEVEL TAB What s up Harry asked hoping that a perky greeting might soften the coming blow. It didn t work Harry. Her eyes glistened with a toxic mix of anger fear and anxiety. What didn t work Harry asked continuing to play dumb while hoping for the best. The adjustment process we used was faulty. We did not test it through the thirty-day cycle. Harry we are billing the wrong amounts And she added sternly while nervously clicking her ballpoint We re dead Technicians have a unique way of stating the obvious. Show me Harry demanded in a last-ditch effort to prolong the inevitable. Perhaps he could find a mistake in the analysis setting everyone free with a deep breath and a close call. Denial had set in. This can t be he told himself. The two examined the results and sure enough Elsie was right. The initial team Harry s team of the best tech minds had simply misunderstood the extent of the problem and therefore had designed a faulty fix. Later Harry would describe the incident like waking up from a nightmare only to find out it was real. I have to get this to Neil right now. Meanwhile get the tech team together for me OK Thanks Elsie. Harry left for the division manager s office. Neil developed the same ashen look on his face once he heard the news and both managers concluded that Elsie was right--they were dead. Several things happened over the next few weeks. Neil was fired along with the programmer who had made the initial error. Surprisingly Harry was suspended for only one week. The worst thing was that the new management had apparently been told to clean up and clean out the mess. Everyone was under suspicion and the place was crawling with 22-year-old consultants. Now sitting outside the general manager s office on his first day back after suspension Harry was quite certain the GM had asked to see him only to tie-up a loose end and send him home for good. Harry he s ready to see you. Harry got up thanked the receptionist and entered George Bear s office. Harry how are you George was a big man. His size and title combined to fill the room. Already beaten Harry responded Not so well sir. Really Why not The GM knew why but asked anyway. To be truthful Mr. Bear I figure you are about to let me go. Is that so The GM asked as he looked curiously at Harry. What do you think should happen Harry considered the question and concluded that he didn t deserve this one. He just wanted to get it over with. Well I m about the only one in the chain of command that s left he replied. That s true and to be honest after a net eighteenmillion-dollar loss the prevailing sentiment was to clean out the entire house but we ve since decided on a different course of action. George wasn t looking for credit but he did want to set the stage for a new beginning. Really Stunned Harry needed an explanation a reason. Survivor guilt gnawed at his soul. Why me It was my group that started this and it was my team that blew the recovery. 35 C R E D I T U N II O N U N O N B U S II N E S S B U S N E S S A AP PR RI IL L 2 20 01 17 7 C U B U S I N E S S . C O M AT C LEVEL That s true Harry but a little research and common sense shows that the problem actually rests with upper management. George let that confession sink in before he continued. It s not appropriate for me to comment on other employees but I will tell you that the recovery effort and the subsequent fiasco rest squarely on management s shoulders. Already sitting on the edge of the overstuffed plush chair Harry leaned forward clearly suggesting both interest and a desire for more information. He chose to let his body language speak for him and remained silent. I find there s a difference between a mistake and negligence and Harry I perceive you to be a victim of circumstance. Although somewhat relieved Harry s curiosity remained. But Mr. Bear I m part of management. George studied the survivor carefully sensing this young manger s internal struggle. Of course you are but you re not a policy maker. I expect you to follow policy not create it. I see this as an environmental issue and in a hostile environment our best employees failed. For example after the initial discovery people worked an excessive amount of hours to find and execute a solution. The recovery was far more complex than the initial problem and yet we managers thought it best to assign the recovery to a group of people who were exhausted and at the same time worried abut 36 C R E D I T U N I O N B U S I N E S S their livelihood. You can t do that. The fact that this happened raises a question. Do you know what it is As he asked George leaned back in his chair curious to hear Harry s answer. How Harry answered hoping not to reveal any additional weaknesses. That s right How on earth could my managers create an environment wherein employees are so obviously set up to fail I m part of this too. It s part of my job to make sure that employees can operate effectively. I failed in this and so did my staff. I spoke with my boss Janet this morning. She understands and supports the actions I plan to take. One of those actions is that I want you to head up the committee that reviews the problem. I m going to give you some powerful resources from several key areas of the business. I want you to find out if I am right and develop some recommendations so that we never do this again. Can you do that Will you listen to our findings I promise you that we will and by the way Harry there s one more reason I m keeping you around. George showed no expression. What s that Do you have any kids Odd question Harry thought. Yes I do an 18-monthold girl. Do you ever look at her and wonder what her future will be and how you will influence her so that the result is success We would be wise to look at our employees that way too. Mistakes will be made but if you keep an eye on the future and what that can look like you ll do well as a manager. Here take this with you. George handed Harry a card that he took from his wallet. The worn card simply read Treat people as if they were what they ought to be and you will help them become what they are capable of being. Johann Wolfgang von Goethe Marc A. Bringman was the Editor of Credit Union BUSINESS from 2006 to 2011. 2 0 1 7 C U B U S I N E S S . C O M A P R I L LEN D ING SO LU TIO NS BY REX JOHNSON M Turning a 700 Score into a 800 Score How can you use this information Knowing what it takes to score 800 plus will show you what s keeping your member in the 700 s. We should all want our members to get our very best rates and helping your members attain their best score will help them achieve this goal. After all isn t that what credit unions are all about Almost all of the major credit card providers are offering some type of credit monitoring or FICO score service nowadays. So members and the general population are more aware than ever about their score. However they still need someone like you to help guide them and truly understand their score. To enable credit unions to help their members we included many tools in our new manual. One of which is featured on the next page titled What Road to Choose . This document gives credit unions a quick cheat sheet when counseling their members. I hope you ll take a minute to check out this quick tool and if have any feedback we d love to hear from you. Drop us a note to UofL Even though times change credit unions will always be about helping people. Rex Johnson is the current CEO and Founder of Lending Solutions Consulting Inc. (LSCI) an organization dedicated to providing consulting expertise to credit unions. For more information regarding Rex s availability or any of LSCI s products services contact us at 877915-7675 or please visit us at 37 C R E D I T U N I O N B U S I N E S S A P R I L 2 0 1 7 C U B U S I N E S S . C O M y team of consultants and I work with hundreds of credit unions each year and we are constantly noticing new trends. In recent years we are seeing more and more credit unions proactively taking steps to help members improve their credit score. You say Rex that s not a new thing that s been going on for years. True but not at the level we re seeing it now. In the past we ve seen things like credit counseling credit-builder loans etc to help those with poor credit improve their scores. Now it seems like everyone wants to enhance their score even the 700 members. With more members interested in improving their score this is one of the things we teach credit unions at our University of Lending classes. When I re-wrote the manual for our classes this year we included an entire section on this important topic. I d like to share a few of the basics with you here today. So what does it take to move a 700 score into the 800 s Scores 800 or Higher What do they have in common 1. No public records 2. No bankruptcy in the last 10 years 3. No collection accounts 4. No charge offs 5. No current delinquency 6. No past delinquency 7. Credit history of seven years or more 8. Homeowners for seven years or more 9. Revolving debt (credit cards) 95% available 10. Inquiries are less than three over the last 12 months 11. Unsecured debt of 5000 or less 12. Oldest trade line is at least seven years old LENDING SOLUTIONS 38 C R E D I T U N I O N B U S I N E S S A P R I L 2 0 1 7 C U B U S I N E S S . C O M EW N introduces Self-Service Coin Centers MADE SIMPLE COMPACT and AFFORDABLE Simple One Button Operation Easy to read prompting display and instructional photos 42 Compact Less than 2 x 11 2 AFFORDABLE 7 500 As low as 400 SERIES CHOICE OF OUTPUT 17 23 Model 405 Full sort with exact bag stops for 5 bags 1 5 10 25 50 1 programmable for Federal Reserve half or full bags Model 424 Mixed coin output to 4 bags programmable by weight or piece count Model 401 Mixed coin output to a vault Contact a Magner Consultant Today Phone 800-243-2624 Email solutions Online 2017 Magner Corporation of America. All rights reserved. Visit outsource to download our free ebook and learn how outsourcing is often more cost-effective less stressful and can complement your in-house collections efforts. 2016 SWBC. All rights reserved. 52440-1479 0316 PSCU brings together credit union members and credit unions themselves. Greg Barnes Sr. VP Marketing One Nevada CU He says She says PSCU was built to serve members the same way we were. Karen Rosales CEO Arlington Community FCU Let s talk about the value of being a PSCU Member-Owner. Since 1977 PSCU has been owned by credit unions and is for credit unions. Today over 800 credit unions claim ownership of PSCU and benefit from payment products and services that enable them to compete with much larger payments issuers. By serving as an extension of credit unions PSCU remains the catalyst to conversations that matter. See what else our Member-Owners are saying at cuso. cuso 844.367.7728 Editorial Calendar 2017 Editorial Closing Dates 30 Days Prior To Publishing Money January February March April May June July August September October November December Payments Credit Debit Cards Car Wars Auto Lending Mortgage Lending Mobile Banking Security Branch Business CUSOs Executive Hiring & Compensation Auto Lending & Lleasing 2 Mortgage Lending 2 Payments 2 Business Lending THE ON LY AL L-D I GI TAL A LL -B U S I NESS RE SOURCE F OR CRE DIT UNIONS