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John, age 30, separated, two children.

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Jason, age 28, single.

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Tracie, age 27, single.

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>Pierre Cardenas believes in the power of brand. Brand is the basis of the connection between his credit union and its target demographic, which he defines, not by age, but by a preference for doing business online.

Wednesday morning at the YES Summit, Cardenas, vice president of retail for the $485 million Amplify Federal Credit Union of Austin, Texas, began by pointing out that overall credit union growth was 1.7%. But without the members who joined via indirect channels, such as through car dealership and retail lending activities, that national growth rate would have been negative.

“Financial institutions will continue to consolidate. Earnings are down, margins compressed,” Cardenas said. But the response from banks and credit unions has been curious. The expansion of physical branches continues, even though branch business growth is expected to be 0.5% over the next three years. In the same period, online business will increase by an estimated 30%.

That statistic has driven strategic planning at Amplify FCU, which has reinvented itself in recent years to reflect the new realities of consumer choice.

Once a Wells Fargo employee challenged one of Cardenas’ coworker to compare the number of branches each institution had. (Wells Fargo many mulitples of Amplify five physical branches.) The coworker pulled out his cell phone, and said, “Every one of these is a branch of ours.”

Amplify’s reinvention was based in part on recognition of the way the public views credit unions. Research has shown that the most common characteristics applied to credit unions are “unsophisticated,” “blue collar,” “have to belong to some organization,” “lack expertise,” “not the same services as banks,” and “have car loans at a pretty good rate.” Given the mainly negative associations, Amplify decided to recast itself futuristically as an online institution.

“A brand is something that people think they are,” says Cardenas. “People become what they believe.” The credit union’s new slogan—“Amplify: Bank less, live more—reflects its determination to give its members the convenience of time. The decision not to include the words “credit union” in the slogan was a conscious determination to avoid any unflattering connotations.

Before the summit, Cardenas explained that credit unions need to be concerned with being relevant and convenient. It’s important, however, to be sure to understand how the target audience defines those terms. “18-to-30s have too many distractions and choices,” he said “They can access whatever they need, whenever they need it. The only market penetration that we can expect to have at this point is with those whose parents have told them to be part of their credit union.

“How long they stay, how much they decide to use a credit union will depend on the ease of use and ability to meet the need at the time. How accessible are we as credit unions? In the past we defined convenience as a branch location with close proximity to work or home. That definition is changing and will start first with Gen Yers. Accessibility is the new convenience.”

Cardenas elaborated on this during his summit presentation, showing attendees scenes of the redesigned Amplify offices. “To build a brand; build an experience,” he explains. The new interiors comprise a multi-purpose center, whose every component mobile, allowing the credit union to host social events of all kinds. Members benefit from the use of wireless connections to provide real-time video conferencing with investment and mortgage advisers in remote central location.

Amplify has also developed a proprietary personal financial management tool called MoneyTracker. The idea came from an employee, who received a green light for development without a formal business plan or ROI assessment. The tool, available free to any member with an Internet connection, provides instant account information and home deposits.

IMHO: Amplify FCU’s willingness to experiment required the whole-hearted support of leadership that is willing to accept risk. This is not to say that there was no risk calculation. It was secondary to an open-minded assessment of human behavior, based not only on statistics but also on trust in widespread anecdotal evidence.

>It is important to know what the major needs of the demographic are, and how credit unions are successfully meeting those needs. But it is equally important to stay on top of what is going on within credit union land so you can draw upon current information and knowledge to further develop effective programs for young adults. In the spirit of YES Summit sessions such as yesterday’s on Young & Free, as well as tomorrow’s session on NCUA’s 2020 initiative, this session provided another opportunity for attendees to learn about another way the movement is tackling the issue of better serving and attracting young adults.

Jeremy Presta, CEO of Parkside Federal Credit Union, led a session on 30 Under 30 – a program initiated by the Filene Research Institute to bring 30 young credit union professionals under the age of 30 from across the country together to develop solutions for credit unions to better serve young adults.

After giving an overview of the last year of the 30 under 30 program and all of the resulting projects from the group, Jeremy spoke about his own group’s project – iAdvancecu.com (actual site under construction):

A mounting talent shortage affecting all industries is projected to peak by 2010. This war for talent will make it even harder to retain top talent and credit unions alone – large or small – will not be able to compete. Combine this shortage with the reality that Generation Y will not only change jobs but careers numerous times, and it’s inevitable that this generation of employees will likely leave your credit union within 2-3 years. iAdvancecu.com, is a website that unites credit union opportunities, showcases our expeditious career-paths and provides testimonials of relevant Gen Y employees that will serve as a recruiting tool for credit unions. (this overview taken from Filene’s website)

> Click here for the full iAdvancecu.com Business Plan

Before he presented, I asked Jeremy what he thought the biggest challenges were facing credit unions in serving young adults:

1. Changing the mindset of not only employees and management, but also convincing the board of directors that we need to focus on this generation.
2. Generally speaking a member early on in the financial life cycle is an unprofitable member. There needs to be some foresight and see the big picture that down the road these members will become profitable, and be the members that we all want.
3. Typically credit union employees including management and board members themselves are of the older generations and they don’t understand and in some cases don’t care to ever understand or serve this generation.
4. Credit unions need to realize that simply setting up a Facebook/Myspace page is serving these individuals or connecting with them where they are.

At the end of the session, Josh Jones also talked a little about the transition of the 30 under 30 program from Filene to CUNA. In early 2009, CUNA will start the application process for the “new class.” I’m looking forward to continuing to be involved with the program in some capacity.

PS – I’d be remiss if I didn’t give a shameless plug for my 30 under 30 group’s project: “Win-Win Savings.” Read the full business plan here.

Resource Links:
CU Tomorrow Blog
Filene Research Institute
Overview & Links to all 30 under 30 group business plans

>One of the biggest challenges in serving “Generation Why” is overcoming young adults’ disinterest in delayed gratification. Kris Wickline, Gen Y consumer program manager for the CUNA Mutual Group, gave her YES Summit audience detailed advice for convincing 18-to-30s to address their need for long-term investing.

Not surprisingly, the top consumer generation is both optimistic and unrealistic about their futures. Eighty percent say getting rich is their most important or the second-most important goal. However, only 5% say they have concerns about achieving lifestyle of leisure.

Even though more than four 10 Gen Yers expect to have to support their parents in old age, today’s young adults are largely ignorant of economic realities. Two-thirds of seniors at four-year colleges will graduate with an average of $20,000 in debt. And as Anya Kamenetz points out in her book “Generation Debt,” 25-to-34-year olds are currently spending 16% more than they earn.

Fortunately, credit unions who act soon can seize significant investment market share. With some notable exceptions, says Wickline, the investment industry is mostly oblivious to the potential of the young adult market. Credit unions can move on this potential, according to Wickline, if they:

• Start with a focus on the short term. Young adults are unlikely to have emergency funds or solid plans to reach short-term financial goals. By helping them succeed with their immediate saving and investment concerns will give you the chance to follow up with wealth-building and retirement. Wickline calls this entry-level intervention as “plowing the runway” so that young adults can land in stormy economic times. Once safely on the ground with basic savings, they’ll be more receptive to your long-term wealth-building messages.

• Educate about debt and money management. Help young adults form an investment plan and execute plan. Don’t be shy about putting your investment products in front of young adults. Wickline says that you can “ask for the sale” without being perceived as using hard-sell tactics and generating resistance.

• Provide simple online investment options supported with solid information. Generation Yers are more likely to face many job changes than their parents. By the same token, they’re less likely to have the access to the same kinds of employer pension and retirement plans and support from Social Security than their elders. They need a range of products designed for them, with low entry and participation limits and easy management procedures.

Wickline cited models of successful approaches. Companies such as ING are online with “personal financial management” (PFM) tools that offer free online investment planning tools that draw 18-to-30s away from their competitors.

IMHO: The idea of building long-term wealth-building is nearly as difficult a subject to sell to young adults as the need for insurance. Anything you can do to extend a helping hand with long-term investing will give you a tremendous competitive advantage by establishing a long-term relationship with young members. You’ll reach Gen Y through online interaction, but you’ll need to back it up with friendly, reassuring face-to-face support.

>In Wednesday’s late interactive session, attendees worked together in groups to create an “award winning financial education program.” The moderators judged all of the entries and have narrowed them down to the top three.

Voting is now closed and the winner will be posted shortly.

> Click here to view all the entries

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