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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 SECURITY ISSUE Branding the Credit Union Difference Golden 1 Credit Union s Stronger Together Campaign DOUGLAS AGUIAR MAY 2017 VOLUME 12 ISSUE 5 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 IN BRANCH PRODUCT SALES Nick Brown CU TRAINING Kenneth C. Bator CU SUPPLIER PAYMENTS Karla Friede BRANCH STRATEGY Bob Gibson CFO CURRENCY Hafizan Hamzah MARKETING Douglas Aguiar AT C LEVEL Marc Bringman LENDING SOLUTIONS Bill Hulstrand BRANCH STRATEGIES Meredith Deen Ashok Kumar Associate Publisher ashok TH E O NLY A L L - D I G I TA L A L L - B U S I NE S S R E S O U R C E F O R C R E D I T U NI O NS THE SECURITY ISSUE Branding the Credit Union Difference Op-Ed Golden 1 Credit Union s Stronger Together Campaign DOUGLAS AGUIAR MAY 2017 VOLUME 12 ISSUE 5 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 subscribe. 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 M A Y 2 0 1 7 C U B U S I N E S S . C O M Fill In The Blanks & Prosper Team Builder Subscription Rate 499 Per Year Single Subscription Rate 75 Per Year TABLE OF CONTENTS MAY 2017 VOLUME 12 ISSUE 5 TAB THE ONLY ALL-DIGITAL ALL-BUSINESS RESOURCE FOR CREDIT UNIONS What does a 75 subscription buy High Quality monthly magazine. Website with 72 back issues 700 articles available On Demand 6 8 12 16 18 UP FRONT Build Your Team Build Your CU Tim O Hara IN BRANCH PRODUCT SALES Nick Brown 21 25 28 31 33 CFO CURRENCY Want Better Portfolio Results Monitor and Assess Risk More Often Hafizan Hamzah MARKETING 4 Tips to Optimize Your Onboarding Call Initiative CU TRAINING Branding the Credit Union Difference Op-ed Douglas Aguiar AT C LEVEL This Is Your Time Kenneth C. Bator CU SUPPLIER PAYMENTS Karla Friede Marc Bringmann L ENDING SOL UTIONS Gordon s Knot When Is the Best Time to Automate Supplier Payments BRANCH STRATEGY Decision-Making Guidelines For Members With High Debt Bill Hulstrand BRANCH BUSINESS Lending Dilemmas Making the Case for Insourcing in Financial Services Bob Gibson Focus on Scheduling Today to Achieve the Potential of Tomorrow s Branch of the Future Meredith Deen 5 C R E D I T U N I O N B U S I N E S S M A Y 2 0 1 7 C U B U S I N E S S . C O M UP FRO NT BY TIM O HARA I Build Your Team Build Your CU was thinking the other day about my childhood friend Robert Warfield. We both grew up in South Florida but Robbie lives in Madrid Spain these days. He and his wife Christina return to So-Fla every year for the Holidays. Each time we meet Robbie s first question to me is always How many issues (of CU Business) have you published When the answer was 12 or 24 or even 72 it didn t seem like much of a big deal but come December 2017 I ll be able to report to Robbie that we ve just published our 156th monthly issue of Credit Union BUSINESS. Even I m impressed Way back approximately 168 months ago when I was researching the credit union executive population to ascertain what kind of information you wanted from a first-class monthly trade publication I had an important interview with the CEO of a multi-billion dollar Texas credit union. This very successful credit union veteran told me that he was not at all happy with the state of the credit union trade publishing industry at that time. He told me that he doesn t want to read about bank robberies because it s his job to prevent them. He was bored with association politics and didn t have time to waste on accounts of CU league golf tournaments or bake sales. I want a trade publication that will help me run my BUSINESS he said. Well I ve just finished a final review of the content of this Volume 12 Issue 5 May 2017 issue and I m happy to tell you that the editorial content contained herein is 100% business oriented and 100% of it will help you run your credit union business if you ll pardon the pun 1. Page 6. Up Front by Tim O Hara Build Your Team Build Your CU 2. Page 8. In-Branch Product Sales by Nick Brown 4 Tips to Optimize Your Onboarding Initiatives 3. Page 12. CU Training by Ken Bator This Is YOUR Time 4. Page 16. Credit Union Supplier Payments by Karla Friede When is the Best Time to Automate Supplier Payments 6 C R E D I T U N I O N B U S I N E S S M A Y 2 0 1 7 C U B U S I N E S S . C O M 5. Page 18. Branch Strategy by Bob Gibson Making the Case for Insourcing in Financial Services 6. Page 21. CFO Currency by Hafizan Hamzah Want Better Portfolio Results Monitor and Assess Risk More Often. 7. Page 25. Marketing Matters by Douglas Agular of Golden 1 CU Branding The Credit Union Difference 8. Page 28. At C-Level by Marc Bringman Gordon s Knot 9. Page 31. Lending Solutions by Bill Hulstrand Lending Dilemmas Decision-making Guidelines for Members with Large Debt. 10. Page 34. Branch Business by Meredith Deen Focus on Scheduling Today to Achieve the Potential of Tomorrow s Branch of the Future Conclusion 100% BUSINESS Oriented Content As you can see by perusing the list above there is at least one valuable article for each member of the C-Level Team CEO CFO COO Finance Department Training Accounting Branch SVP Branch Managers Marketing Department Lending Department. Plus Full access to the website loaded with great information. And 10% of your proceeds go directly to Children s Miracle Network in the name of your CU. Cost just 500 per year. Value Proposition You can sign up 10 or more executives to receive the magazine or just the articles that will be most useful to them by job title. Or pay just 75 for a single subscription the the magazine and website. Either way you will benefit Thanks for reading please subscribe today Tim Why Selling the Team Builder Group Subscription Program is my 1 goal. 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 IN BRA NC H PRODU C T S A L E S BY NICK BROWN 4 Tips to Optimize Your Onboarding Call Initiative O When it comes to a new financial need who do your members and prospective members call first If it s not your credit union then you re getting it wrong. If you want to stay top of mind with customers these four tips for onboarding calls leverage one of the easiest and most effective means of deepening personal connections that last. nboarding is simply one of the most effective ways to make members feel valued and appreciated. Many credit unions see this as an essential step in fostering member loyalty creating top of mind awareness and attracting future business in this competitive and commoditized industry. A number of years ago as an outbound sales agent one of my core responsibilities was to contact new members who came to the credit union through our indirect lending channel. The first priority in this call was to onboard these new members answer any questions they had about the financing of their new auto or RV and then set up various account services. Those members I contacted were always grateful for the call and often I would hear this response from them Wow my bank has never called me to thank me for my business and answer my questions. Countless times these conversations would turn to deeper discussions of how our credit union could service their other auto mortgage credit card and checking account needs better than who was currently servicing them. And when it came time for future financial needs my members would call me first. Onboarding calls are so effective because they enable the credit union and its employees to deepen that personal connection with their members. When 8 C R E D I T U N I O N B U S I N E S S an onboarding call is done right it creates a feeling of reliance and trust and it establishes a personal relationship with that member. This is turn encourages loyalty to the credit union and increases the likelihood that when members have questions snags and future financial needs they think of their credit union first. To capture more members loyalty and business here are four tips to start seeing greater results with your onboarding initiative. M A Y 2 0 1 7 C U B U S I N E S S . C O M IN BRANCH PRODUCT SALES 1 Prioritize onboarding calls. It s reasonable to say that not all onboarding calls are created equal. If you were asked to prioritize onboarding situations you would probably come up with a list that looks something like this 1. New Members and Their Products and Services (personal and business) 2. New Checking Accounts 3. New Loans 4. Lastly New Deposit Accounts There is a good reason for this prioritization. According to a study conducted by BAI Research entitled 90 Days that Make or Break the Deposit Relationship the majority of cross-sales as much as 73 percent are made during the first 90 days of a new account relationship and less than 9 percent are made on accounts older than one year. The research also found that institutions with higher cross-sell percentages boasted a 50 percent decrease in attrition. If our goal with onboarding is to build that loyalty and future member equity then there is no better place to start than at the beginning of the relationship. All new account relationships should be a top priority. They are when the opportunity is the greatest to acquire crosssales and build loyalty. They also represent the greatest opportunity to make additional sales and welcome new profitable products and services. For situations where an onboarding call doesn t lead to additional value in the member s life or to the credit union assess and determine the importance of it. 2 Set aside time for making onboarding calls. A common complaint I frequently hear from employees about making onboarding calls is that they simply don t have enough time to make them. While this is sometimes just a surface complaint to mask the employee s desire not to make the calls there is some relevance. Often employees are asked to make the onboarding calls during downtime however I tend to find that there are a number of other essential tasks competing 9 C R E D I T U N I O N B U S I N E S S for this downtime as well. Tasks such as loan audits title tracking CE courses and others all need to be completed during downtime leaving the employee frequently trying to multitask. This approach is not effective. In a recent Forbes article titled Why Single-Tasking Makes You Smarter Dr. Sandra Bond Chapman explains Multitasking ... overloads the brain and makes you less efficient. She goes on to suggest Silence your phone turn off your email and try to perform just one task at a time... Giving your full attention to the project at hand will increase accuracy innovation and speed. Allow employees to schedule time each day or a few times per week specifically for making onboarding calls. It is best if the employee can do this in an office where a door can be shut or in a backroom where they will not be distracted. As Dr. Chapman suggests this will allow the employee to focus strategic attention on onboarding calls thereby increasing the number of calls he or she can make and the effectiveness of those calls. 3 Structure the call and clarify goals. To ensure that onboarding calls are effective and M A Y 2 0 1 7 C U B U S I N E S S . C O M IN BRANCH PRODUCT SALES Member No I think you helped me with accomplish their purpose they should be structured everything I need right now. with a clear intent and specific onboarding goals must Employee That s good to hear. If you need be put in place to create measurable results. Where anything in the future please give me a call. I onboarding calls are at their best is when they are am here to help. You have my number focused on product adoption and when they assist with Member Yeah I think I have the card you gave members other current and future financial needs. me. As a sales trainer and coach one of the activities I enjoy Employee Great. Thank you for giving us the most is listening to employees as they make live the opportunity to help you with your new outbound calls. Often though on these onboarding calls account. Have a great day I hear exchanges like this I think we can probably step back from this conversation Employee Hi may I speak with [member s and recognize how ineffective this call is. While there name] please is a structure and this employee likely uses it over and Member This is me. over again this conversation does little to accomplish Employee Well hi [member s name]. A few the goals we are striving to achieve with our onboarding weeks ago I helped you open your new account. I was calling to follow up on that and calls. So what should be the focus An onboarding call s focus will be different based see how things are things going on when it is made. Let s assume a credit union chooses Member Things are going good. a 2-2-2 strategy which would be a two-day handwritten Employee Did you have any problems or thank-you card a two-week call and a two-month call. questions on your new account I can answer The two-week call should be focused on three for you specific discussion points Member Nope. Everything is good. 1. Thank the member for their business and to Employee Are there any other products or show pass are valued. services I can help you with atthis valuable offer that theyyou by. this time Don t let 2. Ensure the member has adopted and C R E D I T U N I O N Jump on the CU BUSINESS Express to help your credit 10 union GROW for your members employees and B U S I N E S S M A Y 2 0 1 7 C U B U community. 1. Each member gets CU Business monthly eMagazines. Sign Up Your Entire Crew for Team Builder S I N E S S . C O M IN BRANCH PRODUCT SALES is utilizing all of the ancillary products associated with his or her account. This would include answering questions resolving any fulfillment problems and assisting with the setup registration processes. 3. Cross-sell additional products and services that are applicable to the member s unique financial situation. This would include refinancing existing loans and capturing deposit accounts with other institutions. Lastly qualify the member for additional products such as a credit card. The two-month call should be focused on three additional discussion points 1. Help the member with any remaining product adoption concerns. 2. Follow up on offers sent to the member by the marketing team and identify opportunities to enhance the member s account with new products and services. 3. Ask for referrals. Credit union leadership should take time as a team to identify the important steps in their onboarding calls. Once that prioritization has been established they should create an outline for the call structure and even go so far as to create a script they along with their team will be using in their calls. This leads to tip 4. Ongoing coaching should be done at least once a month by the branch manager or team lead. This frequency is critical to ensure the employee is successfully accomplishing the goals in each call. It also reinforces the training. The most effective way to do this is by listening to live onboarding calls and then discussing what went well and where improvement can be made. The onboarding call is only one part of the overall onboarding strategy but it is arguably the most effective at creating action on members part. This is why it is so important that these calls are made effectively. As credit unions apply these four tips to optimize their onboarding calls they should see a few things happen. First they will see a great level of engagement from employees. Second employee calls will become more focused and purposeful. And third as all this happens the credit union will see an increase in product usage greater member loyalty and higher product penetration. All of these byproducts lead to greater revenue streams to invest back into the membership and into the future. 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 714-681-2821 and nick Ask about his credit union specific workshops and online sales training featured at 11 4 Provide Onboarding-Specific training and continued coaching. Employees absolutely need onboarding call training. These calls are so critical to the success of the credit union and its members that they warrant special attention. Onboarding training should be focused on the purpose of onboarding calls and how employees are going to accomplish these purposes. If a specific structure and script have been created teach the employees how to use them. Have employees look at real scenarios and then have them practice role play and coach each other. C R E D I T U N I O N B U S I N E S S M A Y 2 0 1 7 C U B U S I N E S S . C O M CU TRA INING BY KENNETH C. BATOR This Is Your Time F What does the Miracle on Ice 1980 U.S. Olympic Hockey Team have to do with the present state of the credit union industry If there is a time for everything now is the perfect opportunity for CUs to focus on growth. This formula for success will set your credit union on the path toward greatness. All of that adds up to a potential formula for success for those credit unions that are ready to grasp a tremendous opportunity. Here are a few tips to snatch this chance for greatness or as far back as I can remember I have been a big sports fan. Baseball football basketball hockey full-contact checkers... OK maybe not the last one but definitely the other four. Being a Chicago native hockey was particularly disappointing this year with my beloved Blackhawks getting swept out of the first round of the playoffs. Maybe that s what motivated me to recently watch the movie Miracle for the umpteenth time about the 1980 U.S. Olympic Hockey Team. Yes I know it s a bit campy and everyone already knows how it ends before even seeing the film but I defy any American to tell me they don t get a bit riled up over Kurt Russell s This is your time speech as he is portraying legendary coach Herb Brooks. This latest time watching the movie made me think of my work with credit unions and that now really is your time. While there are still some lingering effects from the Great Recession there is a feeling that it s time for credit unions to concentrate on growth again rather than controlling expenses like an elderly woman clutching her purse while walking through the worst of neighborhoods. Whether you re a fan of the Trump administration or not the odds are there will be less regulation coming our way. This shift will allow executives to concentrate on members rather than compliance every minute of the day. And consumers are still skeptical if not fostering a bit of healthy dislike for the big bank brands. 12 C R E D I T U N I O N B U S I N E S S 1) Tell your unique story. The rise of social media over the past decade or so has not only changed marketing it s also changed branding. It s all about telling your unique story. People today care about who you are as much or more than what you offer. Consumers spend a little extra for shoes when they know the company will also send a pair of shoes to a child in need when they buy them. People buy watches that are a particular color representing a specific type of cancer to honor a survivor they know or a loved one they lost all too soon. Nowadays people buy the story before they buy the product or service. Every credit union has that type of unique story and it has a lot less to do with that brand new checking M A Y 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 TABTRAINING CU account or loan product you just rolled out. It has to do with the causes and people you support. Your story may be We were a 5 million institution serving the local paper mill workers when the plant shut down but by embracing and supporting the community we are now thriving. Or it may be We were founded by five hospital workers 80 years ago and today we continue to understand the unique financial needs of healthcare professionals and their families. That story today is still about how you connect with people not products and it resonates even more than ever. Make sure you re leading with how the support you offer to your specific niche makes a difference. The credit union difference story is a story and a good one but it s not your unique story. Your unique story is about the people you help the causes you support and the reasons you do it. Your current and potential members care about who you are. 2) Make the entire organizational chart the branding department. One of the most important aspects of what I teach is that branding and marketing are not synonyms. Branding is about the overall and total experience with your members. While marketing is a part of that it is just one of a number of components that creates and supports the brand. TURN ON YOUR TRAINERS 4 CU Case in point if the marketing department introduces an advertising campaign that promotes the credit union as a family-friendly place to do business and the member is greeted at the branch with a condescending What do you need that s not branding. At best it s a gross disconnect that creates confusion. At worst it s a deceptive lie. Creating and maintaining a connection with your members goes beyond just providing good service most of the time. Fostering a we care culture is a great start but people don t just buy products and services. They buy experiences. People stay at the Crowne Plaza over a Motel 6 not just for a more comfortable bed but for an overall better experience during their time there. Consumers stand in long lines for days to buy the new iPhone not just because they love the product but for the experience they enjoy in using it. That connection grows through a consistent experience that is reinforced over and over. For those credit unions that are fortunate and wise enough to employ a marketing department marketing does not own the brand. At best the marketing team members are the keeper of the brand. That s why all of the credit union s employees are your first members. It s very difficult if not impossible to get consumers excited about a brand if the employees who support it are apathetic about it. So as I implore my clients market to staff first. Teach them the why behind who you are. Tell them how they are and can continue to be a critical part of your unique story. And work with them to create standards that provide a consistent experience for those you serve every day. withTEAMBUILDER. TRAINING 14 C R E D I T U N I O N B U S II N E S S B U S N E S S 3) Focus. As with any growing and thriving business opportunities can pop up like meerkats. Staying true to your strategic focus is imperative. It s very easy to fall under the trance of bright shiny object syndrome as the small business community refers to it. On the surface some opportunities look very attractive but teambuilder buy M AAYY M 22 00 11 77 C U B U S I N E S S . C O M CU TRAINING TAB taking the time to look closer may reveal that some simply do not align with your unique brand culture or strategy. That bright and shiny object might take the form of a neighboring credit union looking for a merger partner but offering nothing but problems that would take your attention away from the member experience. Or it may be a misnomer that goes something like this Hey even though we have been serving firefighters and their families successfully for decades if we go community we can really grow this sucker Focusing on a clear and distinct field of membership isn t just a credit union idea. It s a smart business approach. Great teams focus on playing their game and doing what they do best. For many of the best credit unions that means understanding and solving the unique problems of the specific group of people they serve. Concentrating on those three areas is the hat-trick for success today. Many of the elements of what a credit union is have come back into vogue in a big way. Odds are you already have exactly what you need to embrace your unique opportunity. But if you feel you require a pre-game speech before you embark on your road to greatness I d be happy to give you a call and offer you a modified This is your time speech that Kurt Russell would appreciate. I can pretty much assure you that for most of you success won t take a miracle. 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 training and strategic planning sessions at or profile kenbator . 15 C R E D I T U N I O N B U S II N E S S B U S N E S S M AAYY M 22 00 11 77 C U B U S I N E S S . C O M CU S U P P LI ER PAYMENTS BY KARLA FRIEDE When Is the Best Time to Automate Supplier Payments W If your credit union s AP department hasn t automated supplier payments yet it may be time for them to seize the leadership role and embrace automation rather than waiting for it to be forced upon them as it inevitably wil. Only good things can come of such a rare opportunity. hen is the best time to automate supplier payments Today s cloud payment solutions are relatively easy to implement and they deliver such a large return for a nominal investment that there s never truly a bad time. But the best time is when accounts payable can take a leadership role rather than having automation thrust upon them by circumstances. This is an opportunity for a rare career win for accounting. For decades AP has been a low priority for technology investment within most organizations and they have had their heads down just trying to keep up with the workload in front of them. Leading a technology transformation is the furthest thing from their minds. Unlike marketing which has become one of the biggest consumers of technology in the organization when people in AP have a problem their reaction is to throw people not technology at it. And when it comes to payments specifically there s more of a tendency to look to their bank because up until recently banks were the only game in town. But banks haven t innovated in B2B payments for decades. Accounting professionals may not even be aware that a new generation of cloud and API-enabled fintechs are finally making supplier payments efficient. Waiting for a trigger 16 C R E D I T U N I O N B U S I N E S S M A Y 2 0 1 7 C U B U S I N E S S . C O M Even if they are aware after so many decades of hardly any technology innovation there s a tendency to sit back and wait for some kind of trigger to drive automation. That might be a new CFO an ERP upgrade a merger or acquisition or simply facing the prospect of hiring more people just to write checks as the company grows. But there s a big difference between passively letting change happen and taking the opportunity to lead. All of these events cause an organization to pause and reflect and to look for better ways to do things. If your AP department is still living in an archaic paperbound world in comparison to the rest of the business that s certain to draw scrutiny and rightfully so. The absurdity of writing checks in a day and age when people are paying with smartphones and using fewer CU SUPPLIER PAYMENTS checks in their personal lives will eventually drive businesses to look for a better solution. There s an opportunity here to take the lead in bringing change. Moving from paper checks and a patchwork of bank payment programs to a totally automated payment solution in the cloud returns an average of 5 per payment. If you re making 100 000 payments a year your organization will see benefits of 500 000 a year every single year. There are comparatively few opportunities in accounting and finance to lead a technology initiative with this kind of positive bottom line impact. The easiest place to automate Not only that but payments is probably the easiest area of AP to automate because it s at the tail end of the process. Scanning and workflow automation require more complex integration and change management programs for multiple stakeholders. In contrast automating payments takes only a few hours of AP time and has minimal impact on stakeholders outside of AP. The savings from process improvements and lower costs can even help pay for other automation initiatives. For the first time in a long time thanks to cloud technology and open APIs there is something new under the sun for B2B payments. There are not many times AP has an opportunity to make the kind of impact they can by automating payments. This is a low-cost easy implementation and there s never a really bad time for it. The best time is when it s your idea and you re driving the solution. Don t wait for someone else to steal your thunder. Step forward and lead. Karla Friede is CEO and co-founder at Nvoicepay. Friede has 20 years of experience in management finance and marketing roles in both large and earlystage companies. Along with the founding team she has grown Nvoicepay into the leading B2B payment network. Prior to founding Nvoicepay Friede was president and CEO of Zevez Corporation VP of marketing for GeoTrust (acquired by Verisign in 2006) co-founder of The Ascent Group director of marketing at Mentor Graphics and part of the PBAS team at KPMG. Friede received an MBA from Harvard Graduate School of Business. What does a 75 B U S I N E S S subscription buy High Quality monthly magazine. Website with 72 back issues 700 articles available On Demand 17 C R E D I T U N I O N M A Y 2 0 1 7 C U B U S I N E S S . C O M BRA NC H ST RATEG Y BY BOB GIBSON Making the Case for Insourcing in Financial Services Is your credit union looking to reduce costs and increase productivity Then insourcing as an alternative to outsourcing might be something to take a closer look at. See why now is the perfect time to insource the processing of commercial deposits and ATMs and what benefits your CU can reap. While an effective solution several disadvantages quickly emerged with this outsourced approach and the expected cost reductions sometimes never quite materialized. With the armored transport market dominated by a few key companies and with demand increasing prices are projected to increase even more over the next several years.3 Sending cash offsite to be processed also creates an inventory need at the branch and makes it necessary to order more cash to utilize in ATMs and for transactions. In addition when funds are tied up in cash in transport they re unavailable so financial institutions need to borrow money from other banks to continue with other operations including loans. With interest rates on the rise and high cash- M any industries most notably IT and manufacturing have begun reexamining the need for outsourcing and are shifting to an insourced approach.1 The benefits of insourcing include improved customer service greater control over business processes and actual reductions in operating costs. As part of their branch transformation strategy to reduce costs and increase productivity many financial institutions (FIs) are following suit and examining current outsourcing strategies. One such area that is ripe for insourcing is the processing of commercial deposits and ATMs. The Downside of Outsourcing In the late 1990s and early 2000s financial services was one of many industries to adopt outsourcing as a way of standardizing business processes thereby leveraging outside expertise and achieving cost savings of as much as 40 percent.2 Processing deposits from ATMs and commercial accounts was one of the core functions outsourced by the financial services industry over the past two decades. To ease real estate costs and counteract employee inaccuracies companies began to rely on armored carriers to pick up and take money away to process it offsite. 18 C R E D I T U N I O N B U S I N E S S TURN ON YOUR BRANCH SUPERVISORS & MANAGERS withTEAMBUILDER. 4 BRANCH BUSINESS C U B U S I N E S S . C O M teambuilder buy M A Y 2 0 1 7 BRANCH STRATEGY TAB order and transportation fees imposed the substantial cost of this service has led some banks and credit unions to begin exploring more cost-effective and efficient options. transportation and processing fees improve inventory management and get a return on investment in a short amount of time. In fact an FI could reduce the number of cash orders by approximately 50 to 67 percent. Keeping Your Money In-House When making the decision to insource specific tasks FIs must consider if the task is strategically important and or has a significant impact on operational performance.4 Processing ATMs and commercial deposits is a critical task that contributes to the overall performance of the branch. It is also one that with the right equipment in place can be retained in-house. By bringing currency processing back in-house FIs can avoid paying high transportation and processing fees and they can negate the need to issue cash orders to make up for cash being processed offsite. With processing done onsite deposits can be quickly processed and paid out as change orders or used to replenish ATMs. As a result the lag time associated with currency pickup transport and processing is avoided and the need to borrow additional funds for other operations is eliminated. The initial technology investment of several currency processing machines is recuperated over the course of months not years in the form of eliminated armored transport service costs and minimized processing time. An institution with five or six ATMs at a single branch location for example might typically rely on armored transport service for daily trips (or multiple trips per day). By switching to inhouse processing that institution can eliminate high 19 C R E D I T U N I O N B U S II N E S S B U S N E S S Getting the Right Equipment Is Crucial Once the decision to insource currency processing has been made the next step is to determine the right technology. Advances in today s currency processing equipment include multi-pocket currency scanners and sorters that are faster easier to use and more customizable than ever before. Those that offer a future-ready design make it possible for FIs to scale up or down as their processing needs change. Utilizing in-house currency processing equipment can dramatically decrease the time it takes for branch personnel to complete routine tasks such as ATM processing. Today s most advanced technology has been shown to reduce the processing time of each ATM from 45 to five minutes. Consider the substantial time and labor savings that could be achieved if this strategy were implemented across multiple ATMs and branches including reallocating employees to highervalue customer-focused tasks or eliminating the need for additional full-time employees across multiple branch locations. Whom You Partner with Matters Key to achieving optimal ROI with an insourced currency processing strategy is a vendor partner to help tailor the equipment investment and configuration to M AAYY M 22 00 11 77 C U B U S I N E S S . C O M BRANCH STRATEGY best suit the needs of a given branch. A vendor with the proper expertise and the most advanced technology can work with branch personnel to determine the proper number footprint and configuration of machines to ensure optimal efficiency. When fully and properly implemented this insourced approach can have a measurable positive impact on an institution s day-today operations and it can be a boon to any branch s bottom line. In today s age of branch transformation identifying opportunities for cost savings and productivity gains is top of mind for all FIs. Insourcing currency processing can open the door to keeping cash and profits inside your institution s walls. With the right equipment you can save on the costly transportation processing and cash-order fees associated with cash-in-transit services. You can also avoid borrowing additional funds and reduce the time and costs necessary to complete routine currency processing tasks. Sources 1 Forbes The Fastest Way To Build Leadership In Your Company Insource http www. sites johnkotter 2014 06 26 thefastest-way-to-build-leadership-in-your-companyinsource 1a3d00571564 2 Accenture Shared Services in the Financial Services Industry An Operating Model to Reach Strategic Goals https com t20160412T053747__w__ us-en _acnmedia Accenture Conversion-Assets DotCom Documents Global PDF Technology_7 Accenture-SharedServices-Financial-Services-Industry.pdf zoom 50 IBISWorld Armored Transport Services Procurement Category Market Research Report from IBISWorld Has Been Updated http www. releases 2015 04 prweb12650938.htm The Outsourcing Decision Matrix https pages article newSTR_45.htm 3 4 Bob Gibson is Vice President Branch Operations at Cummins Allison 20 C R E D I T U N I O N B U S I N E S S M A Y 2 0 1 7 C U B U S I N E S S . C O M CFO C U RRENCY BY HAFIZAN HAMZAH Want Better Portfolio Results Monitor and Assess Risk More Often I Are rates the sole determinant when evaluating your credit union s portfolio risk If so you are likely overlooking a lot of other factors that are impacting your rate of return. Learn what these key variables are and how they can lead your CU to better portfolio results. nvestors often get overly focused on evaluating portfolio risk based solely on the framework defined by their respective regulatory agency. For depositories this framework tends to define risk as a function of parallel changes in rates. However changes in the level of rates are not the only risk affecting portfolio returns other macro factor risks are also typically present such as the slope of the yield curve or changes in spreads. Macro factor risks are market variables that contribute to an asset s yield affect asset pricing and drive return and return variance. Therefore effective portfolio management requires managers to measure and monitor the ever-evolving risks that exist within the portfolio. More importantly it requires them to determine how those risk factors in aggregate impact portfolio performance. Furthermore frequent monitoring of these factors provides vital information to the investor telling the manager whether to stay the course or consider a shift in allocations. Macro factor risks impacting fixed income portfolios can be broken into five different categories 1) the level of interest rates 2) the slope of the yield curve 3) market spreads 4) volatility and 5) prepayments. Each of these variables has an impact on a particular asset s price and also plays a major role in driving return and variance. Level of Rates The absolute level of rates is a function of the state of the economy and policies set forth by central banks and governments (monetary and fiscal policy). Sensitivity to changes in interest rates is most often measured by effective duration which represents an asset s price elasticity for a given parallel shift in interest rates. Duration is a key component of the portfolio management process. Investors use the metric as a target to manage the portfolio. In a liability-driven investing framework aiming for this target sets the mark as that of the institution s liabilities. Getting the duration of the portfolio right and maintaining that target is one of the most important factors in determining whether or not a portfolio will meet the goals set by an institution. Curve Slope Slope is defined as the difference between shortand long-term rates with many market participants choosing to use the two- and 10-year parts of the curve as the basis for the measurement. The slope of the curve can be thought of as an expression of the market s macroeconomic outlook. Changes in slope are typically described as flattening (spread between two- and 10year tenors) or steepening (spread between two- and 10-year expands) as shown in Exhibit 1. An inverted curve (negative spread between two- and 10-years) is also possible but fairly rare. 21 C R E D I T U N I O N B U S I N E S S M A Y 2 0 1 7 C U B U S I N E S S . C O M CFO CURRENCY TAB Another avenue investors can go down to understand slope risk is to change the slope of the current yield curve in their models and rerun their analytics. By doing so managers can get an idea as to how much the value of their portfolio would change. For assets with embedded options like call prepayment options caps and floors the slope of the curve can have a major impact on valuation and performance. A steeper yield curve will push forward rates higher and will move call options farther out of the money a flattening yield curve will have the opposite effect as lower forward rates push the option farther in the money. Investors can monitor this risk through the use of partial or key rate durations shown in Exhibit 2. As fixed income investors changes in rates are the big focus in terms of risk management. But outside of Treasury securities bond portfolios have exposure to other risk factors such as changes in spreads. Assets can be sensitive to both changes in swap spreads (spread of swaps to Treasuries) and their asset-specific spread. Swap spreads are oftentimes thought of as a liquidity premium in the market. A prime example of this liquidity premium idea was the expansion of swap spreads during the financial crisis as seen in Exhibit 3. Market Spreads Similar to effective duration in that it measures the sensitivity of an asset to changes in rates key rate duration moves only one rate on the curve rather than shifting the entire curve. The results help managers identify which part of the curve their portfolio is most sensitive to. For instance mortgage assets which have cash flows spread across the yield curve typically exhibit the most sensitivity to changes in 10-year rates as primary mortgage rates in prepayment models are usually tied to them. 22 C R E D I T U N I O N B U S II N E S S B U S N E S S M AAYY M 22 00 11 77 C U B U S I N E S S . C O M CFO CURRENCY Additionally individual assets have their own specific spreads that should represent the perceived level of risk. Agency MBS have wider spreads to swaps than agency bullets due to the uncertainty surrounding mortgage cash flows vs. the more definitive cash flow of a bullet. Investors can get a handle on the sensitivity to spread changes of a marginal investment or of their portfolio by understanding the spread duration. Another way to think of spread duration is that it is an asset s cash flow duration since the spread affects the discount rate applied to the bond s cash flows. Floating rate securities are perhaps the clearest example of the difference between the impacts of spreads vs rates. Due to the frequent coupon resets floating rate bonds tend to exhibit little sensitivity to changes in rates with effective durations ranging between 0 to 0.50 percent. However these types of securities may have spread durations in the 6 to 9 percent range which makes them more susceptible to changes in spread. See Exhibit 4. Prepayments Volatility Interest rates will move up and down throughout a trading day and as was mentioned above these changes will impact value and returns. The deviation of rates over time is represented as volatility and the level of volatility will play a role in valuation and performance. There are two types of rate volatility that will impact fixed income investments implied and actual. Implied volatility is the standard deviation of forward rates around their mean and is used in the valuation of options such as those found in MBS and callable bonds. Actual rate volatility is the actual variance in rates over a specific timeframe. Actual and implied volatility can diverge significantly over time. See Exhibit 5. This tendency can play a major role in the performance of a portfolio. 23 C R E D I T U N I O N B U S I N E S S For portfolios that have an allocation to mortgage assets changes in prepayment estimates are an important factor for investors to understand. Variations in the expectations of prepayments can have a significant impact on calculations of yield return and duration. It is important to note that mortgages are a varied sort and as a result prepayment estimates will vary based on different collateral characteristics such as age and coupon. Additionally the previously mentioned risk factors will play a role in driving estimates as well. As an example a steeper yield curve will lower prepayment expectations as forward rates move higher and borrowers become less likely to refinance their loans. Monitoring Risk As managers are building out and maintaining portfolios it becomes imperative to keep a close eye on the aforementioned risks. Investors cannot simply evaluate the risk of an asset at only the point of the trade. But given the non-stationary nature of these macro factor risks they must monitor the portfolio s risk exposure on a regular and ongoing basis. An effective way of doing this is through the use of a multidimensional risk analysis or MDRA. The analysis will model the impact of changing rates slope spread M A Y 2 0 1 7 C U B U S I N E S S . C O M CFO CURRENCY volatility and prepayments on a portfolio. An example is shown in Exhibit 6. Macro factor risks can be measured and observed in the market and investors should be able to understand how these different factors will drive value and returns at any one point in time. Getting a handle on each of these risks through frequent monitoring provides managers with vital feedback regarding how their portfolio is performing and as a result gives the investor the information needed to make any adjustments to the portfolio. Hafizan Hamzah is a director at ALM First Financial Advisors joining the firm in 2010. Mr. Hamzah works in ALM First s Investment Management Group and assists in developing client-specific portfolio strategies as well as portfolio rebalancing. In addition to portfolio management Mr. Hamzah is responsible for monitoring and rebalancing hedges associated with the firm s mortgage pipeline and mortgage servicing rights hedge strategies. Hamzah s areas of expertise include fixed income portfolio management mortgage pipeline hedging MSR hedging as well as asset liability management. He received a Bachelor s degree in business administration from Southern Methodist University in Dallas Texas. With 20 billion of investments under management ALM First is an SEC-registered investment advisor acting as an unbiased third party offering commission-free fee-based services to over 200 financial institutions across the country. Services include Asset Liability Management Investment Advisory Merger Valuations Hedging with Derivatives Loan Profitability Analysis ALM Validations Investment Portfolio Analysis MSR Valuations Training and Education and more... 800-752-4628 24 C R E D I T U N I O N B U S I N E S S M A Y 2 0 1 7 C U B U S I N E S S . C O M MA RK ETI NG BY DOUGLAS AGUIAR Branding the Credit Union Difference Op-ed I Conveying the credit union difference helps credit unions stand apart from other financial institutions. But the message often gets lost in translation. Discover how one CU propelled a very successful Stronger Together campaign into significant increase in both brand awareness and membership. n the crowded financial industry the credit union difference can sometimes get lost. An August 2016 TransUnion study shows however that credit union membership is growing at a faster rate than other financial institutions are experiencing. Golden 1 Credit Union (Golden 1) believes when consumers understand the credit union difference membership grows. Recognizing the gap in consumer awareness the Credit Union National Association (CUNA) recently launched an awareness initiative to provide credit unions around the country with resources to effectively communicate to potential members. At Golden 1 emphasizing the credit union difference is the core of the CU s marketing strategy and the foundation for its messaging and communications and the credit union is seeing results. Prior to 2013 Golden 1 s marketing campaigns focused on traditional marketing through branch promotions and print advertising and they often emphasized products and rewards. This approach was limiting because it failed to include the most important and persuasive appeal to consumers that Golden 1 and all credit unions put members first. To define this focus Golden 1 launched the Stronger Together marketing campaign in 2013 with the aim of highlighting the credit union difference as a key competitive advantage in the marketplace. Before developing a new narrative for Golden 1 s advertising campaigns the CU sought to learn as much as possible about consumers financial needs including members and non-members alike. Through a series of intimate one-on-one interviews in restaurants coffee shops and parks across California the credit union asked people what they value in their banking relationship. Golden 1 quickly learned that individuals who understand that credit unions are member owned and operated are more likely to open an account. Instead of retail-focused campaigns the CU learned to evolve its brand voice to connect with consumers on shared values. 25 C R E D I T U N I O N B U S I N E S S M A Y 2 0 1 7 C U B U S I N E S S . C O M TURN ON YOUR MARKETERS MATTERS withTEAMBUILDER. 4 MARKETING teambuilder buy MARKETING TAB Golden 1 is California s leading credit union. Stronger Together . TV commercial for Golden 1 Credit Union for home loans. People desire honesty and transparency. They want to know that the credit union is invested in helping them achieve a bright future and they want commitment to community. With credit unions owners and members are synonymous. This equality leads to a stronger community of people helping people. The consumer desire to be Stronger Together became the hallmark of Golden 1 s newest advertising campaign. In addition to the new slogan the credit union aimed to inject new energy into its brand and bring consistency across its voice. The CU s creative team developed energetic youthful and optimistic copy and visuals to attract a more diverse audience especially those in the early stages of their careers. The bright graphics and gold hues convey optimism. Golden 1 also expanded its advertising mix from traditional communications mediums radio and print ads-- to include television digital and out-ofhome marketing. Combined the refreshed messaging vibrant look and feel and new advertising channels resulted in success. Since launching Stronger Together four years ago Golden 1 has seen a significant increase in brand awareness and membership key indicators the 26 C R E D I T U N I O N B U S II N E S S B U S N E S S M AAYY M 22 00 11 77 C U B U S I N E S S . C O M MARKETING TAB campaign is working. Membership has grown nearly 26 percent over the course of the Stronger Together campaign. In September 2016 Golden 1 membership was up 10 percent over 2015 outpacing the industry increase of four percent as reported by the National Credit Union Administration. Golden 1 s annual brand tracking survey also demonstrates the effectiveness of its strategy. In 2016 consumers in the credit union s key markets viewed Golden 1 as the most trusted financial institution. This remarkable growth is a testament to the CU s unwavering commitment to members and its relentless pursuit of sharing that philosophy in its communications. The CU s advertisements illustrate the reason credit unions stand apart from other financial institutions and the message must get louder and clearer to ensure all consumers are aware of what credit union membership can do for them. CUNA s awareness initiative contains a wealth of tools and information that can be used by credit unions to accentuate why they are the superior choice. Golden 1 takes seriously the responsibility to promote the industry as a whole. If all CUs do their part to communicate the credit union difference they can all be Stronger Together. Douglas Aguiar joined Golden 1 Credit Union in 2015 as senior vice president chief marketing officer. He leads the strategic marketing internal and external communications and community relations teams as well as a multi-million dollar budget. He is also responsible for the evolution of Golden 1 s media and brand strategy. Aguiar has more than 25 years of marketing experience and significant financial services experience. A journalism graduate of University of Southern California Aguiar earned an Executive MBA from the University of Washington. He has held marketing leadership positions at Lennar Corporation Washington Mutual and Countrywide Financial Corporation. What does a 75 subscription buy High Quality monthly magazine. Website with 72 back issues 700 articles available On Demand 27 C R E D I T U N I O N B U S II N E S S B U S N E S S M AAYY M 22 00 11 77 C U B U S I N E S S . C O M TAB AT C LEVEL HERE MARC BRINGMAN Gordon s Knot G When a superior demands something of Gordon that goes against his principles the situation gets tight around the collar. How can Gordon do the right thing without compromising his and his boss s job Find out what happens when a subordinate stands his ground and learn an important lesson your credit union s managers can take away from this heated debate. a dog could hear him when he replied Mr. Hanley what can I do for you Son I need a favor. You up to it Hanley frequently ended his statements with this question more of a challenge than a question really. Yes sir Gordon replied confidently. He had only met Hanley once but he wasn t about to mess up a chance to excel. I m told you re in charge of the training results from that recent seminar. Indeed I am sir. I need those results. How soon can you have them Hanley had a way of putting the rush on everything. You called at just the right time Mr. Hanley. I m working on the summary report as we speak and I can have it on your desk by 3 00 p.m. Does that work for ordon sat quietly at his desk studying the results of the recent in-house managementtraining seminar. The report came in two sections individual feedback by name and department and a summary. Participating managers were told that their individual results would never be released except as part of the aggregate. By asking many personal questions department trainers hoped to provide participants with a unique insight into their potential and how they rank among their peers. Gordon was tasked to compile the information and prepare an executive summary to accompany the aggregate results a simple straightforward task and one that Gordon never thought would threaten anyone s career. By lunchtime he was in the process of adding the finishing touches to the report and although he was a young manager he knew the importance of producing a finished product. Even his e-mails were always organized and well written. Doing the right thing was a way of life for Gordon. He worked hard at it and until today the right thing had always been easy. At precisely 11 57 a.m. the phone rang. He remembered the time because he had just checked his watch anticipating lunch. It was also the moment in which his budding career began to wither. Gordon picked up the phone. Gordon Hanes. Hanes Hanley here said Charlie Hanley the group VP. Gordon tried but failed to drop his voice an octave. He was sure only 28 C R E D II T C R E D T U N I I O NN U N O B BU US SI N N E S S B U S I I E S S N E S S F J EABNRUUA ARRY Y 2 0 21 07 1 66 2 0 1 M A Y C U B U S N E S S . C O M C U B U S II N E S S . C O M TAB AT C LEVEL TAB you This was perfect. The big guy calls and Gordon had exactly what he needed. Summary I understand you have the detailed results on each manager. Yes sir but those results are confidential. Gordon did not like the sudden turn of the conversation. Confidential To whom Hanley asked. Gordon hadn t expected this question. Worse he didn t know the answer. He began to stumble. Mr. Hanley ... the individual results cannot be released to management only the aggregate. That s nonsense son. Please bring that information to my desk this afternoon. At this point Hanley would typically hang up the phone and things would happen. This time however he sensed an uncertainty in Gordon s voice so he waited for a confirmation. But sir the participants were told that the individual results would not be released to management. Gordon thought a logical approach might work. I m not releasing the information son just looking at it. I want to see what kind of managers I have. Now get that complete report to my office. This time he intended to hang up. Sensing this Gordon quickly added No sir The interjection was intended only to prolong the conversation but that wasn t how it came out. Are you refusing to give me this information Rejection was unfamiliar territory to Hanley and he possessed few coping skills. Gordon recognized the emphasis on you in Hanley s threatening question and again blurted out what seemed like the right answer. No sir ... I mean I will be happy to bring the aggregate results to you right away. He hoped promising the results sooner would resolve the situation. He was wrong. I understand Hanley calmly replied. And you ll be a whole lot less happy before the day is out. This time he did hang up. Hearing the click and the resulting empty echo that was now his future left Gordon stunned. He slowly returned the receiver to its cradle took a long breath and whispered This is bad. 29 C R E D T C R E D II T U N IIO N U N O N BBUUS SI IN NE ES SS S B U S I N E S S Thirty minutes later Gordon sat motionless rewinding his brief career and hoping to discover a different ending to the same set of events. His third-floor corner office was quite small but offered a beautiful view of the lake and right now watching the yellow goslings follow their mother down the trail provided some calm not serenity just a welcome peace. That s when he noticed Joan his boss standing ankles crossed silently leaning against the office doorframe. Her folded arms told him all he needed to know. Hanley had already tracked her down. Now with eye contact Joan spoke. Are you trying to get me fired She forced a smile at her favorite subordinate. Gordon wasn t sure if he knew the answer to this question either but answered No. Then he hit her with his best set of coweyes. It didn t work. Gordon do you know who you are messing with Hanley s the group VP. He s been in that job for as long as I can remember. He has nothing to lose. He s my boss s boss manages more than fifteen hundred people and Gordon he really does make the big bucks. She took a deep breath and let the air hiss through tightened lips. Then she posed a single rhetorical question Do you have any idea of how dark it is in this rat hole we re in Joan walked straight into the small office. Joan he wants the detailed reports. So what Well. Gordon hesitated. Answers come slower in dark places. Joan you assigned me to this project and part of the project is to protect the individual results. F E B R MAAYY Y 22 00 11 77 6 2 0 1 MU A R C U B U S N E S S C O M C U B U S II N E S S .. C O M AT C TAB LEVEL TAB The participating managers were told in writing that their results would not be shared. And that s what I m trying to protect our commitment. Gordon studied her reaction to his attempt to put her in the same boat. Her silence left him treading dark waters alone. After a long moment she said Let s see the rub here is that Hanley wants the private data right Gordon nodded. And who would know if you gave it to him I suppose nobody he replied. Then why don t we just give him the report Is there anything in there that you see is a problem I don t know. I didn t look. Gordon never thought to look. Well at least you re consistent. I ll give you that. She thought for a moment. OK I ll tell you what you give it to me and I ll take it up. I ll schmooze Hanley and watch your back. How s that Joan s words struck Gordon as final authoritative and obvious. Then years of rusty counsel passed through his mind. Each thought splashed into a choppy pool of uncertainly and confusion until finally a single thought bubbled to the surface Choose your battles carefully. For the first time in his short career he faced a decision that had to be made. He couldn t avoid it or delay it. He owned this moment this decision. While Joan waited patiently Gordon took a painful moment to consider his answer. Finally he looked at her and said with a sigh I can t give this to you either. Again she forced a smile and said Gordon you ve got a lot of guts with my career. She paused no doubt assessing her career too and then continued. You know what You re right. It s a small thing but sometimes even the smallest things are important and I can see this is important to you. And it s important that I support you. OK I ll handle this you take cover. With that Joan turned and left. Somewhat relieved Gordon sat back in his chair and watched her leave. As she walked away he looked at her quite differently. She seemed to be much taller. Jane Boucher the author of How to Love the Job You Hate reminds us that a 30 C R E D T C R E D II T U N IIO N U N O N BBUUS SI IN NE ES SS S B U S I N E S S supportive environment creates motivated employees. She writes A boss should be willing to use his or her influence and even go to bat for the employee with higher-ups when appropriate. Protecting employees is much easier said than done. Not only must leaders face difficult questions of what is right and wrong they also must determine the long and short range effect on the employee. If you have not faced a similar situation you will. For example a young manager raises a controversial point during a meeting. Hearing this the CEO raises an eyebrow. That single motion causes an overreaction in the managing VP even though the CEO thought nothing of the comment at the time. The opportunity for abuse of power exists on every rung of the corporate ladder. Near the top and with real power less force is needed to impose one s will making it easier for senior managers to misuse power intentionally or unintentionally and at the same time ignore the harmful effects. The best managers will remain aware of the potential for abuse and will create environments in which all employees can operate freely. Marc A. Bringman was the second Editor at Credit Union Business. C U B U S N E S S C O M C U B U S II N E S S .. C O M 30 F E B R MAAYY Y 22 00 11 77 6 2 0 1 MU A R L ENDING SOLU TIO NS BY BILL HULSTRAND Lending Dilemmas Decision-making guidelines for members with high debt A lthough technology and credit reports have improved substantially over the years lending is still just as much of an art as it is a science. Credit reports can only tell you so much about a member s financial situation. What they can t tell you is what is this member s ability to repay going to be 24 months from now Of course no one can predict the future with 100% certainty but we believe that there are tell-tale signs of impending trouble in most cases. Wouldn t it be great to able to predict which of your members with really good credit scores (700 ) are headed for future trouble Let s take a look of some of the key red flags that even high scores might have Escalating debt how many accounts did they open up in the last 24 months More than 4 is a red flag. Inflated income is over 7% of monthly income Opening up small limit credit cards and maxing them out quickly Weak stability For debt consolidation loans it s particularly critical to reach the right verdict. Otherwise you re left holding the bag for all the bad decisions that other lenders have made. Here is a quick guide that we compiled to help credit unions with debt consolidation loans Debt Consolidation Loan Decision Guide On the secured side let s look at how to build vehicle loans for members that have high unsecured ratios. In our experience the loan and applicant should have the following to mitigate the higher unsecured debt The loan-to-value is lower and preferably the applicant is putting some money into the loan. You do not want to exceed 100% LTV preferably less than 90%. The credit union has completed a diagnostic check on the vehicle and it is in good working order. The applicant has at least 12 months on the job and cumulative of 24 months on present and past jobs (minimum). The applicant has paid similar loans (not only the loan type but similar dollar amount). This car would be the members only vehicle and its function is transportation to and from a reliable income source (the motivation to pay a second vehicle in the household drops dramatically). The vehicle is no more than 50% of the applicant s gross annual income The unsecured debt is not escalating (the member has not opened more than 4 accounts in the last 24 months). The applicant is a member that handles their deposit accounts effectively (i.e. minimal-to-no courtesy pays). 31 C R E D I T U N I O N B U S I N E S S M A Y 2 0 1 7 C U B U S I N E S S . C O M LENDING SOLUTIONS The credit union can receive direct deposit and auto pay from the applicant. The applicant is paying rent or a mortgage payment and not living for free with others . The applicant has at least one meaningful revolving account with some availability. Note When some but not all of these are present the LTV on the vehicle needs to become lower whereas the credit union is in a bankruptcy proof position. As stated above there s no perfect way to predict the future but using a proven set of guidelines can minimize your troubles while still finding ways to serve the underserved and help the members that need it the most. Best wishes as you continue through the busy spring and summer lending seasons. Bill Hultstrand has worked in the credit union industry for 20 years. As director of business development for Lending Solutions Consulting hespecializes in helping credit unions to enhance their marketing efforts both internally and externally to reach more of the underserved. He holds degrees in business administration and marketing from Judson University. 32 C R E D I T U N I O N B U S I N E S S M A Y 2 0 1 7 C U B U S I N E S S . C O M BRA NC H BUSI NES S BY MEREDITH DEEN Focus on Scheduling Today to Achieve the Potential of Tomorrow s Branch of the Future T Credit union branches are in the midst of a significant transformation today. Faced with the need to reduce operating expenses and grow profits credit unions are rethinking the way they attract new members deepen relationships with existing ones and attempt to provide the very best service possible. and budget so as credit unions begin down this path three different branch models have come into existence The traditional branch model This is probably what comes to mind when we think of a typical branch today. The layout is familiar and functional yet set up in a way that tends to favor the credit union not the consumer. For example account holders may have to work with two or three different employees to resolve an issue or learn about new products or services. Such a silo ed approach also makes it difficult for employees to access all of the member s information thus missing out on valuable opportunities to crosssell or provide exceptional service. The self-directed branch model This model represents the best of both worlds between the traditional branch model and the vision for the branch of the future. Self-directed branches are designed for maximum speed and convenience for their account holders. Instead of human tellers and long lines these branches provide fast easy transactions using video tellers smart ATMs touchscreen devices and other technology. If members need more assistance these branches also make it easy to schedule an appointment 33 C R E D I T U N I O N B U S I N E S S M A Y 2 0 1 7 C U B U S I N E S S . C O M echnology is another factor in this evolution. The emergence of online banking mobile banking smart ATMs interactive video technology and other innovations now make it possible for credit union members to perform common transactions and research financial products and services without ever visiting a branch. Not surprisingly overall branch traffic is in decline. According to the 2015 FMSI Teller Line Study there has been a 45 percent drop in transaction volumes since 1992. Yet despite this trend there is still value in the branch. According to a 2016 J.D. Power study the number of branches has declined but they are still considered a key channel for resolving members problems or completing more complex transactions. While many once thought technology would eventually lead to the death of branch-based banking experts now view branch transformation as an opportunity for credit unions to gain a new competitive edge. The evolving landscape of credit union branch models Most credit unions see the benefit of this transformation now yet unfortunately they can t simply flip the proverbial switch and instantly convert each of their locations into the ideal branch of the future. Modernizing branches takes considerable time effort BRANCH BUSINESS with the right person to answer their questions. All of this is designed to help members to get in get out quickly and get on with their day. The personalized full-service model To imagine this example think of the Apple Store and how it has revolutionized the retail experience. Similarly in this branch model account holders receive hands-on concierge-like service from friendly knowledgeable staff. Credit union employees are trained as universal associates capable of managing transactions themselves or introducing the right team member to resolve any additional questions. The focus is on the credit union member s experience and satisfaction and these employees do all they can to provide worldclass service while also driving higher quality interactions and more profitable transactions. solutions are helping credit unions improve the way they hire manage and retain top talent and in doing so provide an ideal branch experience that increases satisfaction loyalty and bottom-line results. For example in the case of the personalized fullservice branch model a manager can use specialized scheduling solutions to forecast future traffic volumes and then schedule the right employees to best meet this demand. These sophisticated schedules factor in such variables as employee skills availability certifications and other qualifications balancing those employees labor costs against demand and budget. Additionally specialized staffing solutions give managers detailed visibility to efficiency and performance. In this case she can schedule a part-time teller for specific times and re-allocate other employees to secondary duties such as outbound calls or balancing the vault. Multiple models multiple challenges A single solution yield many benefits Yet managing an organization with three different branch models comes with a few challenges especially those related to the way credit unions deploy their workforce. Each type of branch requires employees with different talents so credit unions must have a wide array of employees with specialized skills financial knowledge dedication to member service and other attributes. More credit unions must also be able to schedule the right employee at the right place at the right time to meet demand and control labor costs. There s a lot at stake If they can achieve these goals credit unions will improve their ability to serve account holders and create highly profitable salescentric branches. As their branches continue to evolve credit unions can rely on human capital management solutions to overcome staffing challenges inherent with the branch types of the future as well as today. In doing so human capital management delivers a rare win-win scenario technology that enables credit unions to increase members experience and satisfaction while helping the overall organization reduce operating expenses increase sales and improve profitability. Meredith Deen is Director Products & Services for FMSI A Kronos Company which provides financial institutions with business intelligence and performance management systems for efficient branch staff scheduling and lobby management. She can be reached at meredith.deen 34 The technology advantage Clearly credit unions need the best possible way to attract and manage a high-performing workforce for all branch models yet many question how to accomplish this objective. Human capital management technology may be the answer they are looking for. Human capital management C R E D I T U N I O N B U S I N E S S M A Y 2 0 1 7 C U B U S I N E S S . C O M A cold-pressed dilemma. A hot date for dinner. Every transaction has a story. Sometimes small decisions have the biggest impact. That s why PSCU offers a robust suite of card programs that address your members needs at every step of their day. As the nation s leading CUSO we provide feature-rich Visa and Mastercard programs that attract members and help you earn their loyalty. Life doesn t stop. Neither do we. That s our story of service. credit 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 ONLY A LL-D I G I TA L A LL-B U S I NE SS RE SOURCE F OR CRE DIT UNIONS