By: Cynthia Pollard
There’s a question I ask credit union executives every day, and more often than not, it’s the first time they’ve ever been asked it:
When was the last time you evaluated your broker-dealer?
If the answer is “never” or “I honestly can’t remember,” you’re not alone. Many credit unions operate with the same broker-dealer partner for decades under the assumption that, assuming if nothing’s obviously broken, everything must be fine.
Unfortunately, the cost of complacency isn’t immediately obvious. It’s silent, gradual and quite expensive. Let’s look at five risks that quietly accumulate when broker-dealer relationships go unexamined year after year.
Risk #1: Technology That’s Holding Your Advisors Back
Take a moment to think about how your advisors actually spend their day. Are they advising members, or are they wrestling with legacy systems?
If your team is manually building reports, toggling between disconnected platforms or drowning in paperwork for simple tasks, then you’ve got a problem. Modern advisor workstations handle the tedious administrative work automatically, freeing advisors to actually do what they do best: guide members toward financial success.
Can your advisors onboard a new client digitally in minutes? Can they pull together a comprehensive review without spending an hour hunting down data? If the answers to questions like this are negative, then your credit union is losing productivity (and revenue) every single day.
And here’s what really stings: Your members don’t care that it’s the broker-dealer’s technology. When accessing investment accounts feels clunky compared to the experience of using your mobile app, your members will blame you.
Risk #2: Flying Blind Through Your Own Program
Pick up your pencils for a pop quiz: What’s your investment program’s current member penetration rate? How many new households came onboard last quarter? What’s your year-over-year advisory asset growth?
If you can rattle off loan metrics but need to “check with the broker-dealer” for your investment program numbers, that is a clear indication of a visibility problem.
Simply put, you can’t manage what you can’t measure. Receiving data weeks late in static PDF reports, rather than through real-time dashboards you control, is the difference between proactive and reactive program management.
You should know immediately when penetration stagnates or advisor productivity dips, not six weeks later when quarterly reports finally arrive. By then, the opportunity to correct the course has already passed.
Risk #3: Leaving Money on the Table (Lots of It)
When was the last time you benchmarked your program economics against the market?
Revenue-sharing structures, platform fees, payout grids, etc., vary wildly across broker-dealers. The terms you negotiated 10 years ago, or even five years ago, might have been competitive then. But the landscape has shifted considerably since.
And, even seemingly small differences in revenue-sharing or fee structures compound to massive dollars over time. A revenue split that’s just 10% less favorable than market alternatives could be costing you six figures annually.
The cure for this is transparency. Request economic modeling from your broker-dealer. Compare your current arrangement against industry benchmarks. You may discover that renegotiating terms, or switching platforms entirely, could generate substantial additional income without changing anything about how your program operates.
Risk #4: Recruiting and Retention Problems
Try recruiting an experienced financial advisor to your program, and see what happens when they ask about your broker-dealer’s technology, transition support and practice management resources. You’ll have a difficult time attracting top advisor candidates if your platform is outdated or your broker-dealer offers minimal recruiting assistance. It’s that simple.
It’s a brutal reality, but unfortunately, experienced advisors won’t sacrifice productivity or earnings to join your program, no matter how much they love your mission. They need compelling reasons to make the leap. Think comprehensive transition packages, modern technology and dedicated practice management support.
Broker-dealers that actively help credit unions recruit and onboard talent make program growth possible. Those that don’t? They make it nearly impossible.
Risk #5: Missing the Next Generation of Investors
A traditional, advisor-led model probably serves members with upwards of $100,000 to invest. That’s great, for now.
But what about your members in their 20s and 30s that may only have $1,000 to invest? What about younger professionals just starting to build wealth?
Emerging investors, especially younger ones, are inundated with ads, podcasts and all sorts of coverage for investment technologies that exist outside of your credit union’s ecosystem. If you want to compete for their attention and give them an investment platform they can trust, your broker-dealer must offer digital investment platforms (robo-advisors) integrated with your mobile banking.
Digital platforms let you serve smaller balances profitably while building relationships with future high-value members. And, when these members accumulate assets, they’ll eventually graduate to full-service advisor relationships. It’s a wealth management continuum that serves your members at every life stage.
Without a digital platform, you’re conceding an entire demographic to competitors who view your members as nothing more than numbers.
The Bottom Line
None of these risks will crash your program tomorrow, and that’s exactly what makes them so dangerous.
It’s crucial to review your broker-dealer relationship every five years, if not sooner. Not because partnerships magically expire, but because technology advances, economics shift and what worked brilliantly five years ago may be costing you a fortune today.
Want the Full Story?
This article scratches the surface of broker-dealer relationships. For a complete evaluation framework, including specific questions to ask, detailed comparison criteria and our proprietary five-phase review process, download our free white paper: “Patching the Hidden Revenue Leak in Your Wealth Management Program.”
Cynthia Pollard serves GSG as president of investment program management. With over 35 years as a licensed professional, Pollard leads the wealth management division’s efforts in transforming credit union investment programs into industry leaders. GSG’s credit unions and advisors consistently rank in the top 10% of their peer group.