Bringing Investment Services to Banks and Credit Unions: the Haves and Have-Nots

Have You Considered Partnering with a Bank or Credit Union?

25 Jul 2017
Have You Considered Partnering with a Bank or Credit Union?

Have you ever considered partnering with a local bank or credit union to offer investment services? It may not have occurred to you, but adding an investment program can mean significant growth and opportunity for both a financial professional and the bank or credit union.

Over the past decade, many financial institutions have either merged with another institution or closed their business because they aren't able to compete with larger institutions. In fact, according to research by S&P Global Market Intelligence, the total number of credit unions dropped from more than 8,000 in 2007 to a little over 6,000 in 2015. Likewise, banks over the same time frame dropped from more than 7,000 in 2007 to a little over 5,000 in 2015.

In this competitive landscape, financial institutions must work hard to differentiate themselves from their competitors, draw in new customers and retain their existing clients or members. You can offer a value proposition that will help the financial institution stand out from their competitors — a synergistic relationship that benefits both parties.

In fact, even though we’ve seen banks and credit unions consolidate, the percentage offering investment services has continued to rise. Between 2007 and 2015 we have seen banks that offer investment services rise from 24.4 percent to 27.2 percent, and credit unions rise from 12.2 percent to 15.5 percent.

Research shows adding an investment program can increase a bank or credit union’s profits up to 78 percent for a deposit-only customer or member, and relationships can last up to 63 percent longer. Research also indicates customers and members who hold an investment with their primary financial institution are 45 percent more likely to say a bank or credit union is the best source for financial advice; 6 percent are more likely to recommend the financial institution to others. It’s important to note adding an investment program rarely replaces existing core deposits but instead supplements them. The relationship greatly benefits not only the financial institution but also the financial professional.

A financial professional benefits in three ways. First, you get instant community recognition. Let’s face it, no matter how much you market and advertise, there are people who have not heard of your company. But they are familiar with the local financial institution where they bank. They trust it. If the financial institution allows you to present yourself as an extension of itself, its credibility in the eyes of the local community is transferred to you. That results in the second benefit — referrals.

Tellers, cashiers and front-line staff at the bank or credit union can be your best friends and business associates. Get to know them. Tell them what you can do for the institution’s clientele. When the bank or credit union’s customers — who you would probably never meet without the financial institution’s partnership — approach them with investment questions, they’ll most likely refer the customers to you. Aligning yourself with the financial institution and building those personal relationships will drive additional referrals to you and generate the third benefit — untapped revenue.

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