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Chris Catliff, CEO of Vancouver-based North Shore Credit Union, poses for a portrait in North Vancouver, October 17, 2011.
Chris Catliff, CEO of Vancouver-based North Shore Credit Union, poses for a portrait in North Vancouver, October 17, 2011.

Investment

Credit unions increase their appeal Add to ...

Customers who walk into North Shore Credit Union’s new branch in Vancouver’s Kitsilano neighbourhood might be confused.

With a granite rock-garden fountain, glass walls, a fireplace, a concierge with wet towel service and cappuccinos, and a kids’ zone, it doesn’t exactly illicit the same sense of purpose as walking into a bank branch does. But that’s exactly the point.

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Canadian credit unions, which have long differentiated themselves from their stodgier rivals, are going to even more extreme lengths these days to set themselves apart. Ironically, they are doing so as they delve into a broader array of business and wealth management services in an effort to bring their product suites more inline with those of the banks.

The force behind this push is the desire to capitalize on what credit unions see as a window of opportunity to make large inroads in the fight for customers. Major players argue that the financial crisis created a degree of frustration with banks among small business owners and wealthy individuals, as well as a new willingness to shop around for financial services.

That, coupled with new regulations that are expected to give a jolt to the credit union movement, has prompted a number of credit unions to step up their game either by offering new products, hiring more qualified talent, designing new branches, or launching new advertising campaigns.

The country’s financial services players are all jostling a little more these days, in a bid to attract the baby boomers, who are increasing the demand for services such as succession planning as well as basic wealth management. The aim of credit unions is to bolster their market share and to do so, they are placing more emphasis on demonstrating to their customers that they are capable of offering a full lineup of products and services, including managing their wealth.

“Without a doubt, credit unions are increasing their wealth management assets at the expense of the banks,” says Chris Catliff, the CEO of Vancouver-based North Shore Credit Union.

Part of the reason for that, he says, is actually due to the banks’ strategy of making financial planning and investment advice a more accessible service within normal branches, rather than a private banking or brokerage offering. Because Canadians are now used to being able to walk into a branch and talk about mutual funds or succession planning, they are comfortable broaching such topics in credit union locations, he says.

As that has been happening, credit unions - which have typically lagged far behind the banks in terms of wealth management expertise - have been hiring more certified financial planners, insurance advisers, and other professionals to add to their capabilities. And they say they are trying to set themselves apart by offering more personal attention and seeking to maintain lower staff turnover. North Shore, for instance, boasts that it has a much higher financial planner-to-asset ratio (at about one to $10-million of assets under management) than a typical financial institution.

“It’s very competitive for small business out there,” said Frank Kennes, vice-president of credit at Libro Financial Group, a credit union in southwestern Ontario. “What we’re trying to put a big emphasis on is succession planning for small business, and that involves both the wealth management side and small business banking. “So we have coaches that are familiar with the operation of small businesses, but also people who help business owners plan for their future on the wealth management side - either planning for passing the business on to the next generation, or preparing themselves for retirement when they want to get out of the business.”

Credit Unions say they are stretching themselves to keep up with the increasingly complex requirements of business owners.

“Credit unions across Canada have built very solid foundations in the traditional lines of business, but I think they’re recognizing the tremendous importance of being in this space as demographics change and as it grows,” said John Finnie, director of investments and insurance at Meridian Credit Union. Meridian, Ontario’s largest credit union, has 63 branches and 8 commercial business centres serving 263,000 members and more than 15,000 businesses. Mr. Finnie says that growth in wealth management sales and assets, which were stagnant at Meridian four or five years ago, are now running well above 20 per cent per year.

With the baby boomers aging and Canada’s wealth set not only to grow but to be transferred to a new generation, “the urgency is definitely accelerating everybody’s efforts to ensure that we make full offers available to the membership,” Mr. Finnie said.

Meridian has increased its adviser count by more than 40 per cent in recent years, and this spring it launched its largest advertising campaign to date, focused largely on wealth management. Part of the rationale for the campaign is to raise awareness among Ontarians that credit unions don’t just offer the basics when it comes to financial services.

North America’s first credit union actually began in Levis, Quebec, in 1900 when Alphonse Desjardins established the first caisse populaire, which would go on to become the Desjardins Group. Credit unions grew to become a major force in Quebec, where the Desjardins network now controls more than 40 per cent of the retail financial services market, according to Moody’s Investors Service. Credit unions have also made considerable progress over the decades in Saskatchewan, Manitoba, Prince Edward Island, British Columbia and New Brunswick. But while nationally they held about 16 per cent of retail bank deposits and 19 per cent of residential mortgages in 2010, credit unions across Canada continue to live in the big banks’ shadows - especially when it comes to less traditional products.

In its 2010 budget, the federal government said that it would allow credit unions to incorporate federally, rather than just provincially, enabling them to operate across the nation. That has prompted Moody’s to make the following prediction: “given the size and significance of the credit union segment in Canadian personal and commercial banking, we believe that a smaller number of centralized credit unions could pose a longer-term strategic challenge for the Canadian banks in the domestic market,” the credit-rating agency said in a report.

Ralph Luimes, chief executive officer of Hald-Nor Credit Union in Ontario said that credit unions are gaining as they take advantage of their new ability to consolidate and become larger.

But Mr. Luimes, who has been active in a group of credit union professionals from across Canada who discuss how best to serve small businesses (a group that was formed more than five years ago), argues that credit unions have always been strong in the small business space. What’s changing now, he says, is the public realization of that.

“We consider the credit union group to be a very natural fit with small business and with people in this type of an economy because of the fact that we operate and still deal with our people at the kitchen table or at their office or at our own office desks,” said Mr. Luimes, who operates in rural and small-town Ontario.

Banks, too, are making their advisers more mobile and going to new lengths to form lasting relationships with their customers. They are also placing more muscle into the small business space.

Credit unions, meanwhile, are trying to walk a fine line between expanding and yet maintaining the more personal touch that has traditionally been their main advantage in attracting customers.

Mr. Catliff suggests that it’s possible to become more like a bank in terms of product offerings and services while retaining that small-institution feel. And he argues that because credit unions like North Shore aren’t manufacturing investment products such as mutual funds, but are selling products made by other companies, advisers gain a higher degree of trust.

“We have the full product universe, but we don’t push our own products,” he said. “When you go into banks, especially at the level of $100,000 to $500,000 of investable assets, they push a lot of their own products.”

Doce Tomic, the CEO of Credential Financial Inc., which provides credit unions with wealth management services, says “credit unions have a huge opportunity in the wealth management space.”

Even with the market pullback, Credential’s assets have grown by roughly $3-billion to more than $11.5-billion in the last three years, he said.

“The crisis created a shift in consumer behaviour, and I really think it created a strategic advantage for the credit unions,” Mr. Tomic said.

It’s this potential advantage, and the desire to drive it further, that is spurring North Shore Credit Union to spend tens of millions of dollars on new branches that Mr. Catliff describes as more closely resembling a Four Seasons hotel lobby than a bank branch.

Many Canadians, he said, think of financial planning the same way they think of going to the dentist.

“They’d walk in and be told that they haven’t been saving enough and lectured for putting balances on a credit card when they had a line of credit, sort of like being told they haven’t been flossing and now are going to have a drill in their mouth,” he said. “It would engender a gag response. So we came up with this metaphor of the financial spa, because when you go into a spa, with all of the things that are in place, you feel comfortable disrobing and having people poke and prod at you.”

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