Mining the Acres of Diamonds in Your Credit Union Membership

I have heard the old ‘acres of diamonds” story retold many times over the years. My favorite version is the one told by Earl Nightingale the late great radio pioneer and motivational speaker. The story goes like this, a farmer in South Africa hears about diamonds being found in different parts of the country so he sells his land and spends the rest of his life in futility looking for the elusive diamond fortune. Meanwhile, back at the ranch, or the farm in this case, the land the farmer sold in quest of fame and fortune turned out to be one of the most fertile diamond mines in the country. The original farmer went out in search of his fortune not realizing that if he had spent the time and energy on his own land it would have yielded acres of diamonds.

A recent edition of American Banker contained an article that told a similar story. While the article examined banks it could very well have described credit unions. It seems a survey conducted by Greenwich Associates revealed that cold calls take up 20% of bankers’ time but bring in only 9% of their new business. In contrast, they spent 42% of their time on referrals which yielded 21% of new business. These survey results reinforce what I am sure you already know which is “mining” our own membership base is more fruitful that outbound “cold call” type marketing. Of course, we have to do a certain amount of cold sourcing to supplement our referral efforts but the results tell us that a majority of our time should be spent mining our own “acres of diamonds.”

I recently spoke at a corporate credit union conference and related some of my personal experience with this concept. A former broker dealer that I worked for embraced the cross-sell concept within the broker dealer and financial institution. The end result was the financial institution reaped nearly 20% of its non-deposit revenue from its investment program and the average client who had a core checking account and was an investment client utilized an average of nine products with the financial institution compared to 3.73 products for the non-investment service customer. A core checking account was defined as the main checking account for the client i.e. they had direct deposit and wrote more than 10 checks per month.

Space does not permit me to elaborate on all of the strategies employed to get to these impressive results. The financial institution made the commitment to a sales culture throughout the company and also made the determination that investment sales were a key product within the overall product mix. Likewise, the broker dealer made a commitment to cross selling the financial institution products to complement the referral efforts made by the staff. There was an incentive compensation program for the tellers and new accounts staff and there was an incentive for the financial consultants to refer checking accounts, home equity loans, etc. The end result was an impressive 11.7% client penetration for the investment program and a contribution to the financial institution bottom line of approximately 17% of non deposit revenue.

What does this mean to all of us? At the risk of “preaching to the choir”, it tells us that members who are introduced to the credit union investment program are “stickier” members. They will stay with the credit union longer. They will also generate more fee income for the credit union as evidenced by their propensity to use more credit union products compared with a member who does not take advantage of the investment service. These “investment households” also tend to bring in new deposit dollars to the credit union. In this time of squeezed margins, the credit investment program can be a welcomed fee income contributor when it is integrated into the overall credit union product offering and backed by a cross-selling program.

The timing couldn’t be better for credit unions to examine their cross-sell and investment program referral systems. History shows us that successful integration leads to high revenue producing investment programs in the financial institution marketplace. I look forward to working with you to develop a plan to mine your own “acres of diamonds” as we work together to increase the investment program penetration success at your credit union. History can repeat itself when we work together to achieve the common goal of bringing optimum service to our members.