I have always seen credit unions as being consumer advocates. I mean, aside from typically offering great rates, low/few fees, and a wide portfolio of personal finance solutions, our job is to help members become better savers, better investors, and better money managers. Doing what is best for members is supposed to be what's best for the credit union, right?
Well, according to our current business model, that's not necessarily true.
If a member wants to open a new savings account, employees are compelled to offer the credit union's best possible product to fit the member's deposit profile and term requirement. There's nothing wrong with that. But what if the member can get a better rate elsewhere? What if the member can get a MUCH better rate at another financial institution? This situation puts the credit union's mission, and its bottom line, in a precarious position.
Could a credit union model emerge to address situations like this? Not just a gentle paradigm shift...a dramatic change? I mean, what about a credit union without deposits...without loans?
What I'm proposing is adapting the travel agency model and the Progressive Insurance model to the financial services world. This new credit union's purpose is completely selfless: find members the best possible pricing on all financial services, whether it's in house or not. For an annual fee, members basically get a completely unbiased advocate who scours the marketplace to find the best deal.
This credit union could generate operating income by negotiating contracts with major financial institutions. Because in a small way this credit union becomes a marketing arm for these financial institutions' services, it would be worth paying some sort of "subscription" or "broker" fees to be included in the search process. Membership dues, educational seminars, and a dramatically reduced operating budget as compared to traditional credit unions would further help this model work.
To avoid conflicts of interest or "pay to play" scenarios all relationships with any financial institutions would be disclosed to members up front. As the credit union builds capital, future deposit and loan products could be offered...but only if they are priced at on a "price match" basis. In other words, if the credit union cannot offer (based on current spreads) the best possible price on a product they simply lead the member to the market leader.
This model saves members time, money, and gives them something they don't necessarily have in today's marketplace: a totally non-biased, trusted guide through the complicated world of personal finance.