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3 posts categorized "Gen Y"

February 07, 2012

Guest Author Marvin Umholtz: Stop Feeding the Strategic Crocodiles Snapping at CU Heels

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The following strategy-focused overview candidly dissects the challenges and risks that are dangerously snapping crocodile-like at the heels of credit union leaders.  The mere fact that there is so much change going on and so much change that could go on in the 2012 to 2013 timeframe makes credit union’s reluctant to take major strategic steps when significant energy and resources might be demanded to manage through these unprecedented challenges.  Although potentially unsettling for those who like easy answers, this overview’s’ fundamental premise is that today’s credit union leaders must thoroughly understand what they are up against and mitigate it.  Credit unions aren’t paranoid if malignant forces are truly out to get them!  Use this overview as a discussion-starter at the next Management Team or Board of Directors meeting. 

Strategic Macro-Trends Affecting 2012:

  • Today’s political, legislative, and regulatory risks far exceed the traditional operating risks – credit, interest rate, liquidity, transaction, compliance, strategic, and reputation.  The crushing regulatory burden exacerbated by compliance’s escalating cumulative complexity now drags on the credit union business model and threatens its future viability. 

  •  The polarized Congress and the gridlocked legislative environment that results cause strategic uncertainty in financial services regulation, mortgage finance, and the economic recovery.  The November 6, 2012 elections could lead to a massive macro-directional overhaul of the federalgovernment.  That added ideologicaluncertainty makes scenario planning and financial modeling difficult at best – perhaps impossible. 

  • Many credit union officials claim that the National Credit Union Administration (NCUA) Board has been relentless in imposing its interventionist agenda on credit union decision-makers.  On a regular basis the NCUA Board demonstrates through its policy directives, supervisory edicts, rulemaking, and enforcement actions that its priorities too often stray from an emphasis on safety and soundness toward micro-management and counter-productive social engineering.  However, the biggest burning question – How much is the corporate credit union crisis resolution going to ultimately cost? – remains unanswered.

  • In addition to its own pre-disposition to re-regulate credit unions, the NCUA is mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the Consumer Financial Protection Bureaus(CFPB) statutory mission to examine for and enforce additional complex and costly requirements on credit unions.  The NCUA is destined to become a branch office of the marketplace-controlling CFPB enforcing a “level playing field” of fewer consumer choices and limited credit availability.

  • The global economic situation has not been this troubled in decades.  The U.S. Federal Reserve System Board of Governors has promised to keep interest rates at unprecedented lows through 2014.  Only slight improvements are expected in overall economic growth and employment over the next several years.  Consumers will continue to focus on deleveraging their debt and limiting their spending.  The federal debt continues to grow and the political inability to deal with demographically unsustainable entitlement programs embeds more uncertainty into the fiscal dynamic.  The wearying margin-less economic situation obstinately refuses to go away.

  • Additional strategic hot topics: net worth expectations, capital access, deposit insurance reform, moral hazard, too-big-to-fail, systemic risk, loan portfolio mix risks, charter conversions, prepaid cards, consumer activist groups, financial literacy, credit union service organizations, participation loans, partisan political polarization, and many specific credit union-identified hot topics.  

Key 2012 Strategic Takeaways:

1.     Fundamentally Different Decade Ahead.  The next decade will be fundamentally different – economically, competitively, demographically, culturally, and politically – from the preceding decade.  Using the same strategic approach to the financial services marketplace as in the past would be insane.  The economy in particular is expected to inch its way along impeding everyone’s business plan.  To keep the credit union’s metaphoric head above water, its leaders must fully understand the prevailing undercurrents that radically impact on strategy.

2.     External Risks > Internal Risks.  External risk factors – especially political risk, regulatory risk, and complexity risk – will have more impact on a credit union’s strategic success than will internal factors.  What one does not control will exceed what can be controlled.  Get used to it – uncertainty and how well it gets incorporated into strategy is critical to a credit union’s successful operation.

3.     Federal Government Not Friend.  The Congress, the National Credit Union Administration Board, the Consumer Financial Protection Bureau, and the Federal Reserve Board have their own political agendas and are not a credit union’s friends.  Don’t let them fool anyone into thinking otherwise.  Instead, expect them to keep making things more difficult.  Treat their increasingly costly, complex, and burdensome demands with deference – but validate, verify, and when appropriate challenge their directives.

4.     Ultimate Stabilization Costs Unknown.  Regardless of whether the NCUA Board’s loss estimates for the corporate credit union legacy assets are realistic or not, the Board sets the Temporary Corporate Credit Union Stabilization Fund(TCCUSF) assessment based upon those estimates and they drive the credit union’s costs.  Nobody knows for certain how deep the multi-billion dollar TCCUSF hole really is or how long it will take to pay it off.  Plan for the worst, hope for the best.

5.     Industry Infrastructure Fractured.  As a direct result of the 2008 financial system meltdown, the current credit union industry’s legacy infrastructure – including its in loco parentis regulators, non-risk-rated deposit insurance regime, and even its traditional trade associations – are showing signs of rust and structural weakness.  Proactive demolition and reconstruction of these faltering institutions sans dogmatic platitudes, entrenchedoligarchies, and one-size-fits-all approaches could go a long way toward restoring real return on investment for each increasingly diverse and independent credit union.

6.     Heavy Mortgage Loan Mix Untenable.  In the absence of a serious refocus of lending strategies credit unions are at risk of becoming the next Savings and Loan debacle.  Collectively credit union loan portfolios are dangerously loaded with low-return fixed-rate mortgages.  Many credit unions also rely heavily on originating and selling to the secondary market that is currently in flux due to the conservatorship of Fannie Mae and Freddie Mac, the glaring absence of any private market investors, and Congressional proposals that could radically reduce the demand for mortgages.  It’s an accident waiting to happen that credit unions must anticipate and avoid.  

7.     Non-Bank Competition Toughest.  Big banks, community banks, thrifts, and even other credit unions are not a credit union’s biggest competitors.  Big box retailers, insurance companies, payday lenders, and other non-banks are running circles around traditional federally insured financial institutions and it will only get worse because most of the non-banks’ offerings are convenient, uncomplicated, and consumer-friendly.  Credit unions, and especially Congress and regulators, should learn from these competitors’ successes rather than try to stamp them out.

8.     Boomers & Seniors Rule, X & Y Drool.  Aging baby boomers constitute a major portion of credit union memberships and along with many seniors dominate credit union boards of directors.  Generations X, Y, and the very young will not be a credit union’s salvation in the near term no matter how hard they try to attract those smaller demographic cohorts.  Each credit union needs to find out what their existing baby boomer members want and find a way to profitably give it to them.  Neglecting boomers could be fatal to the institution’s bottom line.

9.     CU Business Model Threatened.  The traditional low-cost, high-service credit union business model seems increasingly at risk from its cumbersome governance structure, limited access to capital, reliance on loan and investment income, legacy modest means mission, innovation-killing hyper-regulation, and inadequate products and services authorities.  Credit unions desperately need additional ways to generate income, broaden service offerings, streamline delivery systems, and generate scalable growth.  The credit union business model will need to evolve in ways that will make the traditionalists uncomfortable, but the alternative is stagnation.  Credit union leaders must proactively advocate this business model evolution since it won’t be simply handed to them. 

10.  Urgency for Change.  Lead, follow, or get out of the way.  Credit union elected officials and management executives that are unwilling to be drivers of change should seek early retirement.  The future belongs to credit unions that are committed to and intensely involved in change.  A change management skill-set and a sense of urgency will be required if a credit union wants to emerge unscathed at theother end of the coming decade’s strategy-altering uncertainty-laden gauntlet.

 Have questions/comments for Marvin Umholtz? Leave them in the comment section below. 

September 27, 2011

Not Measuring Results -- Some Jaw-Dropping Insights into Credit Union Social Media

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by Ron Daly 

Recently, to gauge our clients' level of interest in our new social media "getting started (or not)" course, we decided to send out a survey and see where our clients were (or weren't) with social media. 

The course that Jimmy Marks, our Creative Media Director, spent the summer building focuses on: 

  1. Deciding whether or not to get into social media and the information you'll need to gather first
  2. What it takes to make good content
  3. Getting fans and followers that match your goals
  4. Safeguarding yourself against compliance and security issues
  5. Monitoring your results

...and we wanted to see how useful that advice would be to current clients who were interested in social networking. 

We sent out a simple survey. The results we got back were shocking. 

First, some table setting:

Average size of credit union surveyed: ~400 million

Average year-over-year share growth: 5.04%

Average number of members: 35,216

Now, the numbers worth noting:

  • 63% of CUs surveyed are involved with and using social media in some form. 
  • 54% of those are using Facebook, the winner by far. Second place was a tie between YouTube and LinkedIn
  • Of the CUs that said they are using social media, 51% had been using social media for less than two years.

Interesting thusfar, but here's the number that made my jaw hit the floor: 

  • Of the CUs surveyed, 76% DO NOT MEASURE THEIR SUCCESS OR THE RESULTS OF SOCIAL MEDIA AT THEIR CREDIT UNION. 

What??? 76%??? It's true, according to our results. 

Now, I'm not one to just hear numbers and completely ignore how they got there. As I looked at a later question, where we asked respondants what information they would want to hear in a social media workshop, many people said they needed measurements and better metrics. As a result, part of me wonders how much the lack of measurement has to do with not understanding what these CUs are measuring or how to measure it.

Some of the results were actually very helpful - many CUs are measuring their results in feedback and next-steps in the marketing/sales funnel, not just numbers of "likes" or followers. I worry, though, that much of the problem with social media is how people think it's a solution to something. If you don't have a clear message and a clear understanding of how people make buying and borrowing decisions, what difference could YouTube or Twitter possibly make? 

At DigitalMailer, we have lots of followers and friends and likes and so-on and so-on and so-on. But make no mistake, we don't call any of those "leads". Not until we've been contacted by that person via email or phone. It's great to promote the brand and talk about what you're up to, but that's not where our scope is focused. Twitter and Facebook help us keep in touch with partners, clients and some very interesting people - but pleasing clients and making products and services that save people money is the thing that keeps the lights on. 

In our workshop, we've got a lot of helpful information and some good actionable steps. More importantly, we encourage the kind of forethought it takes to talk yourself (or your superiors) OUT of doing social media if it's NOT the right way to spend your time, money, or creative energies. 

The workshop is $500 and includes a 90-minute presentation and a downloadable workbook. To sign up for our next session, click here

July 13, 2010

The acorns are still small - is it time to quit watering the oaks?

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by Ron Daly 

Here in Virginia (at DMI world headquarters), we've experienced very little rain lately. Last night, however, we had a real soaker. Everything that grows got a much-needed drink and the grass is suddenly greener on everyone's side of the fence. 

This heatwave/thunderstorm pattern's put me in mind of the debate about "Gen Y" members/customers and their late Gen X/Young Boomer parents. Should CUs go after young members in hope of "watering" these financial acorns into the might oaks their parents have been? Should they continue to ignore these (mostly) broke users in favor of more fruitful consumers with better credit? Lending opportunities will keep on going for boomers and Gen X, right? 

Maybe not. The picture's looking a little bleak for the rapidly-aging Americans that have turbo charged our economy these past sixty years. A report from the Today show this morning showed many Boomers and some Gen Xers will run out of retirement money during retirement. Quite a pill to swallow, but not unexpected given the events of the past two years. 

Here's where you prove yourself a clutch player in the lives of your older members. You continue to guide them through the rocky shoal of making sure they can have what they need to stay afloat when they're not working and trying to enjoy their "golden years". Reports such as the one mentioned and increased economic concerns will undoubtedly weigh on your member's minds. Be the shoulder to cry on. 

And then, there's the youngsters. Rob Rubin of FindaBetterBank.com wrote an article in the Huffington Post about attracting younger members and making a conscious effort to decrease the average age of a CU member. It's easy to get caught up in the hype regarding Gen Y and to be sold a bunch of snake oil about how your CEO has to breakdance on YouTube and get a million hits to save you from being acquired in a merger. It's far more important to look at the facts. 

There's a good article in this month's Credit Union Management magazine about "capturing" Gen Y members. It highlights the good work of credit unions like Shell FCU and their iLife program. An important snippet from that article: 

"A lot of kids saw the struggles that their parents were going through and they didn't want to make the same mistakes," says [Traci] Archer [, Marketing Manager]. 

And as a follow up: 

iLife seems to have indeed spurred a youth movement within the Shell FCU membership. According to Archer, in the Spring of 2008, the mean age for all Shell FCU members was 47. In Spring 2010, the mean age was 41. 

That's an actual result. Hard to argue with facts. 

The article has great examples from a lot of other credit unions that went on a mission to recruit more Gen Y members and succeeded with enviable results. It's easy for young people to get disparaged by the media and the current climate. You can be a shoulder for them to cry on, as well. Make it known you want to create a lifelong financial relationship with them and start treating them with the respect and due deference you've shown the generation that sired them.

That bit of "data" that was being thrown around a while ago about how much money Gen Y stands to inherit? It's looking to be less and less likely all the time. The generation that we presume has been handed everything they've got is very likely to miss out on the big bonanza we've pictured them coming in to when we're all dead. Does that mean you're going to have thriftier, sharper consumers when Gen Y comes of age? Only time will tell, but you could certainly guide these young, pliable members in that direction. That is, if you're interested in having any members at all in the next ten to fifteen years.