Have you noticed what your local credit unions are up to lately? They’re becoming more sophisticated by the minute, with many of them offering investment services programs that can rival the biggest banks and, maybe, even you. One such institution, Addison Avenue Federal Credit Union in Palo Alto, California, recently launched a managed accounts program and plans to offer a fee-based financial planning platform by early next year.
Addison, with $1.7 billion in assets, sits right in the heart of Silicon Valley and serves the employees of technology giants Hewlett-Packard, Agilent Technologies, and Phillips Electronics. As a result, many of the credit union’s employees are among today’s mass affluent, having more than $500,000 in net worth, excluding their homes, and annual incomes higher than $100,000. Addison has traditionally offered mutual funds and annuities to its clients, who are considered members because credit unions are not-for-profits that are owned by accountholders. But as the higher-net-worth clients’ appetites have become more sophisticated, says Scott Davis, president and CEO of Addison Avenue Financial Partners, the credit union’s SEC-registered RIA, Addison has become “more aggressive” than most credit unions in the investment services arena. Clients are “looking for alternatives for money management,” says Davis. Through its new platform, Addison plans to offer ETFs, actively managed mutual funds, and separate accounts managed by U.S. Fiduciary, Russell, Frontier Asset Management, and Standard & Poor’s.
Davis says Addison is likely one of the few credit unions out there that is offering managed accounts. Addison’s managed accounts program and its fee-based products will be delivered through Addison’s third-party broker/dealer, CUSO Financial Services.
Credit unions have traditionally been required to run their investment services divisions under a separate CUSO, or Credit Union Service Organization. But the National Credit Union Administration (NCUA), which charters and supervises federal credit unions, recently ruled that a credit union can now either run the program under a CUSO that is a registered broker/dealer, or it can move the program “into the credit union,” Davis says.
Addison Avenue Financial Partners offers a full-service investment option as well as a self-directed online service.
The fee-based managed account program will be the “third leg” of the credit union’s investment division, Davis says. Addison also plans to hire more licensed financial consultants. It now has 17 financial consultants spread throughout its 26 branches, which stretch from Vancouver, Washington, to Puerto Rico. “We added five [consultants] last year and we expect that over the next two years we’ll add another eight advisors,” Davis says, adding that Addison’s financial consultants far outpace other advisors when it comes to production. “Our average consultant generates about $44,000 in gross commissions per month,” he says. “The average in the industry for financial institutions is somewhere around $20,000.”
Moving Toward Fees