Credit union members are hungry for financial advice and education to help make the most of their savings. After the financial challenges from COVID, even more people are seeking advice than in the past – a recent study by Charles Schwab found that 61% of 401(k) participants believe their situation warrants financial advice from a professional, compared to 50% in 2020. Many people have experienced life changes, income reductions, or new expenses and are looking for help to get back on track. According to a study by Capital Group, one in four women reduced or stopped their contributions to employer-sponsored retirement plans during the pandemic, and 40% expected the past year to have a long-term impact on their finances. And some people who didn’t have financial challenges from COVID now have new financial goals – such as moving to a different area, changing careers, or retiring early – and they want help mapping out their strategy to reach them.
Many credit unions do provide access to a broker or financial advisor, yet fewer than 2% of members engage with those credit unions services. Considering the strong interest in financial advice, where is the disconnect? Members are looking for a strong and transparent personal relationship that focuses on education and building trust, and is not pressured into buying certain products or funds. According to New York Life, it’s not just members about to retire who want financial advice; 53% of Gen Zers and 51% of millennials said their nest-egg savings had made them more likely to consider getting help from a financial professional. Providing this advice can help a credit union build its relationship with members. But because of the range of experiences and needs, cookie cutter advice doesn’t cut it; the financial advice must be personalized.
A new type of program can provide members of all ages with customized financial advice from fee-only fiduciary advisors and it’s been shown to have a greater impact on their savings compared to working with a broker, which is the traditional method used in the credit union industry. An analysis conducted by Marc Lieberman, CFA and founder of Shorepine Wealth Management in Tiburon CA shows that a member who works with a broker to manage a $1M portfolio for 20 years will lose out on more than $662K of additional returns compared to working with a fee-only fiduciary advisor. That’s because fee-only advisors have a lower “all in” fee cost of about 1.2%; they’re not focused or rewarded based on the number of products they sell, such as annuities and mutual funds with loaded hidden fees. Instead, a fee-only advisor is rewarded by building relationships with members and driving strong financial performance for their clients.
My company, Wealthramp, was originally designed to give consumers direct access to vetted financial advisors who work solely and directly for clients. But since the pandemic, demand and inquiries from credit union executives looking for a better investment advice solution have increased. Their ask is straightforward: how do we offer a member-centric program that will strengthen their trust in our services? The answer is to work with people you can trust to always have your best interest in mind.
When a credit union works with Wealthramp, their members receive access to vetted, fiduciary financial advisors, with several options customized specifically for each credit union branch. Wealthramp provides access to more onsite financial advisors and virtual planners who meet the individual needs of their member clients. The advisors have different areas of expertise and can help members in a variety of situations – from young adults who are just getting started with their financial plans, to entrepreneurs who are looking for financial advice to help launch and grow their businesses, and long-time members who are nearing retirement and need focused financial advice to help prepare for their next stage of life.
The relationship and the advice is designed to be hyper personalized. Members have the option to meet the advisor how they want – whether it’s virtual or face to face. The advisors build a personal relationship with members and focus on the help they need – and they provide advice, not sales. Someone who is about to retire, for example, will be able to work with a fiduciary advisor who can provide cash flow planning and independent, unbiased advice; not someone who is paid commissions to sell certain products.
Why would credit unions want to offer this service? It’s another way for the credit union to strengthen its relationship with members, by offering a thoughtful service that helps them build financial security. Members will save thousands of dollars in retirement and credit unions can make money from fee sharing – with a transparent fee structure that is clear to the advisor, member and credit union. The key to making this work for all parties is to build a partnership with a vendor that genuinely understands the credit union’s culture, expectations, policies and procedures, along with industry standards. Consumers respect and join credit unions because they operate entirely with the principle of “people over profit.” With the right partners, investment advice can be another area of the business that lives up to that promise.
Pam Krueger is Founder & CEO of Wealthramp, an SEC-registered advisor matching platform that connects consumers with rigorously vetted and qualified fee-only financial advisors.She is also the creator and co-host of MoneyTrack on PBS and Friends Talk Money podcast for PBS Next Avenue.