Connection Credit Union in Silverdale, Washington, serves the residents of Kitsap County – all 566 square miles of it. The median income for a household in the county is $46,840.
Growing a credit union there is not an easy business.
“We've got $25m in assets, about 3,000 members and we've had to scratch and claw for everything we can get,” says Scott Prior, CEO of Connection Credit Union in Silverdale, Washington, that serves residents of Kitsap County.
The problem is that Connection is competing in a world of big banks and its service offerings, like those of most credit unions, are strictly no-frills. Like all credit unions, it is owned by its members, who also are the depositors and clients. Unlike a bank, its goal isn't to make the most money for investors but to serve those members as best it can. On average, loan rates tend to be better at credit unions and interest rates on deposits (while still miniscule) tend to be higher than those on offer at the banks.
That may not be enough to really do the job credit unions want to do. Connection's biggest ambition right now is to provide not just checking and savings to members, but also financial advice. “We get questions all the time from members who need guidance,” Prior says.
How to get advice to those clients is a thorny issue. Advice costs money. Prior doesn't want to raise fees on members to pay the salary of an in-house investment advisor, especially knowing just how cash-strapped many families are. “This has been one of the biggest challenges and frustrations that we've had,” he adds.
So Prior has signed up with Future Advisor, one of a new breed of online investment advisory services that have sprung up in the last few years. Future Advisor is negotiating with another 20 or so credit unions in hopes of forging a similar agreement, one that gives members desktop or mobile web access to the company's online services, which will help you develop an asset allocation plan as well as to look for ways to cut fees and generate tax savings on your portfolio.
“Only about 1% or 2% of all credit union members have access to a good financial advisor in-house,” says Joe Cianciolo, vice-president of business development at Future Advisor. The number of credit unions offering investment advice actually dropped 12% between 2008 and 2012.
Credit Unions like Connection are trying to fill the hole for financial advice for people who are solidly middle class. They have an advantage: since the financial crisis, credit unions are trusted much more and have attracted a lot of interest. Two-thirds of Americans are still furious that the country's biggest banks – the same that now dominate the financial services landscape to a greater extent than ever before – for their roles in the 2008 financial crisis.
So credit unions are trying to expand their businesses, particularly into providing financial advice to the middle class. That's a demographic band that holds nearly no interest for the giants of the financial industry.
To the giants, you can have $250,000 in assets and still be considered small fry, even though that's more than most American households have socked away in their retirement nest eggs by the time they're approaching 60-years-old.
Those of us who are not rich, and in most in need of basic advice about our portfolios, our retirement plans and estate plans, are least likely to be considered attractive clients by independent financial advisors. And they're right: our problems and questions, while important to us, are basic and banal to most financial advisors. We don't need enough of their time and expertise to generate enough in fees for us to be worthwhile clients, leaving at least some of us still relying on banks for those basic services.
That's why the odds are pretty high that even though you're reading this column you don't have a financial advisor. Depending on which survey you believe, anywhere from 50% to 75% of American adults have never sought help from a financial advisor at all, even though they are more conscious than ever before of the need to have someone trustworthy steer them through the maze of investment options and other financial decisions.
And if you think you don't need an advisor, you're probably wrong. Advisors are great at helping you calculate the impact of your financial decisions and develop the best strategy. Want to play golf daily? An advisor can tell you just how much that's going to affect your retirement nest egg. Should you invest in volatile stocks or – at the tail end of the 30-year rising market in bonds – still put money to work in fixed income? An advisor can guide you.
Not surprisingly, Connection and Future Advisor aren't the only ones to spot the potential. Big broker-dealers like LPL Financial also are making a big push to provide credit unions with brokerage, wealth management and other service.
Are these partnerships good deals for potential clients? Quite possibly, and especially if one reason that you've been holding off on seeking financial advice is that you don't know who to trust.
Credit unions aren't perfect, of course. It is probably a good idea to ask yours just how its leaders selected the particular partner – Future Advisor, LPL or some other firm – and what the alternatives were. Compare the fees you'll pay and the services you'll receive from the credit union-sponsored advisor to what is available elsewhere. And ask how much of those fees you'll pay will flow back to the credit union.
“I can't be all things to all people, but this is something I can do for my members,” says Prior.
This article originally appeared on guardian.co.uk