Here are the top 5 ways to improve your credit union's return on assets.
- Budget more aggressively.
Unfortunately, over time the budgeting process has moved from being a management tool to that of a Board tool. It must be communicated to the board that the budget should not be used as a board gauge to measure management effectiveness, rather its intended purpose should be to serve as a management tool to assist in monitoring the financial impact from operations. Once management is confident that this "tool" won’t be used against them, they can begin shooting for the stars and quite possibly reach the moon.
- Evaluate fee structure annually.
For decades it’s been taboo to suggest that a credit union consider raising fees to generate more income. However, sound asset & liability management principles for financial institutions require an adequate level of non-interest income to help minimize risk from a fluctuating interest rate environment. Optimally, a financial institution should generate 20% of its gross income from fees.
- Conduct a re-organization.
Healthy credit unions don't restructure on a regular basis, so the process is usually an unfamiliar one leaving credit unions to learn from their mistakes along the way. Many companies are restructuring to more effectively meet such challenges as shortening product life cycles, rapidly evolving technology, declining return on assets and intensifying competition. It may be time to re-evaluate the effectiveness and efficiencies of the employees at your credit union.
- Adjust those dividends down to above market.
Credit unions have had a history of offering better dividend rates than those offered by banks. The problem is that credit unions will often offer rates that are the highest in their markets, placing them in a position where they’ve become their own worst enemy. By lowering your objective from being the most competitive and setting your share rates above the average market for similar products, you may find a huge savings in your cost of funds and continue to offer your members a relatively substantial return.
- Consider using incentives to motivate.
Paying incentives to employees to perform a job for which they’re already being compensated, is a difficult concept to fully appreciate. Credit unions seem to be lagging behind the industry in this area as well as in another area that is closely tied to incentive programs, and that being the development of a sales culture. To fully appreciate the impact incentives will have on business volumes, try a simple one-time test of a simple low-cost incentive program that can be utilized to promote most programs offered through the credit union. Visit http://www.cuSchool.com and locate the FISHBOWL icon to learn more about this sample incentive program that will positively impact business.