Clients,
I love a good competition. Recently, I was playing cards with my adult children, they were home for a visit and inevitably the visit always seem to end in a night of cards. I love to win, rather, I hate the pain of losing more than the joy of winning :). My kids will tell you that when they were growing up, I never “let them win” at cards… ever. Thank goodness my wife was there to balance my competitive nature when raising the boys.
So what was the consequence of this competitive parenting strategy? Aside from some 8 year old tears a decade ago as dear old Dad smashed the boys 5-0 in Go Fish for the 100th time, my boys got better. In fact, both of my kids are great card players and very competitive themselves. This was evidenced by the 3 pots of coffee we drank together and stayed up until the wee hours of the night playing cribbage until we ended in a draw.
What does that have to do with lending? Well, for the first time in what seems like forever, lenders are competing with the CFO for investment dollars. There are only two things we can do with deposits, we can lend them out or we can invest them on behalf of the members. It’s easy to sell when the product is basically free. Rates are going up and will continue to go up for the foreseeable future.
Risk Free Alternative – Your CFO with the click of a mouse button can move millions of dollars to US Treasuries and get a return higher than you were living on during the past 2 years. For the past 24 months, we have been pricing with the strategy of “I’d rather have part of something, than all of nothing!”. I get it. Times are changing, you have to up your game
“Know yourself, know your enemy, know the terrain”
Sun Tzu, The Art of War
Now, the CFO is not your “enemy” she is your friend. The enemy is all the other lenders stealing your loans, with better sales effort. The battle has shifted to the mountains. This is how you adjust your tactics for competing in ALCO and the Board Room for those deposit dollars.
Train – Train your lenders to sell value and budget (hint, we help you with that). It’s time for your lenders to raise their game. Even the best athletes practice. Get with your employees and teach them how to overcome objections and actually sell instead of quoting rates!!!
Appeal – Appeal to the mission of the credit union, we exist for the mutual benefit of our membership. No member ever called into your credit union asked what the CFO was earning on their bullet CDs.
Demonstrate – There is more to the value of a loan than the yield. Do you know the actual revenue that your department produces? Have you calculated the revenue from ancillary sales and cross-sales as part of the equation? At a minimum your net yield needs to be higher than a risk free alternative. The accountants will want you to account for all the costs associated with generating that yield, but let’s get serious, those are sunk costs and the majority of the cost is salary and benefits. In this bananas employment market if you have good lenders, you are going to want to hold on to them . Do you ned to tighten up? Probably, but you can overcome a lot of this by getting your employees good at selling. There are not a lot of problems that revenue can’t cure.
It’s a fun time to be a lender.
Stay connected with us, we are here to help you win in this competitive environment. It’s time for us to shine when the economy is turning.
P.S. Next time we are together, I’ll bring my cribbage board 🙂
Don Arkell
Owner
CU Lending Advice