Using Referrals Effectively to Gain Wallet Share

Patelco Credit Union tracks referrals from front line staff to their investment program. Doing so has lead to increased wallet share.

With net new member growth at just over one percent, many credit unions are looking to grow by increasing their penetration of existing products and services among current members. Data from the 2007 Credit Union Retail Investment Services Benchmark Program,compiled by Callahan & Associates and Snyder Consulting Solutions, illustrates the value of offering investment services to members. Credit unions with retail investment programs are experiencing growth through referrals both to and from the credit union. While most programs are tracking referral activity from the credit union to the investment services program, only about one-third are tracking referrals from the investment program back to credit union products and services.

Tracking Referral Activity
Credit unions most active in tracking referral activities to and from the credit union and investment program are dual employee programs, where the representative(s) are an employee of the credit union and are dually managed and supervised by both the credit union and the broker-dealer that the credit union has contracted with. Of these, two-thirds have dedicated tracking systems that document not only the actual number of referralin both directions but also the dollar value of the referrals themselves.

Utilizing Internal Resources
Patelco Credit Union ($4.1B in San Francisco, CA) tracks referrals from tellers and member service representatives (MSRs) using an internally developed program. By utilizing Patelco’s Intranetsystem, MSRs use simple drop-down boxes menus to send referrals to investment advisors/financial consultants. The system is fully integrated with Patelco’s customer relationship management tool and provides the advisor with a brief description the referring representative receives a congratulatory email and $25 as an incentive.

Measuring Success
In 2007, 2,096 referrals were generated by Patelco’s staff, of which 42% were qualified, resulting in $8.2 million in investment and insurance sales. Richard Adams, Director of Investment and Insurance Services at Patelco, noted that the average ticket generated per new customer was $35,000, yet the average ticket generated per new customer through a referral was $41,800, resulting in a gross dealer concession (GDC) or revenue of just under $2,100. The member takes interest in this process, since they were referred to someone that the MSR knows, he said, and this results in a higher wallet share.

Adams also manually tracks FC referrals back to the credit union. In 2007, those referrals generated $16.4 million in new deposits and 60 mortgage applications for the credit union. Referrals from the program to the credit union are not incentivized, with the understanding that FCs must comprehend their client’s full financial status. CU and program executives view the dual referrals as a key to maintaining solidarity and cuccess for both the credit union and the investment services program.

Importance of Referrals
Referrals are an important method for increasing product awareness of all of the credit union’s products and services. A recent Internet Strategy Consortium study of online credit union members found that almost half of the members were unaware of their credit union’s financial planning and investment resources. For the members who were using their credit union’s financial planning services, the top reason members cited for how they heard about the credit union’s program was through credit union staff referrals.

Tracking the referrals from your investment program can help reinforce the importance and value of referrals. Many credit union investment programs are providing incentives for referrals from the credit union to the investment program. Beyond sophisticated tracking systems, credit unions should consider some basic comparisons of the product usage patterns of the retail investment clients compared to other member segments in order to fully understand the value and potential of this important service.

April 26, 2016

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