Leadership Perspectives | 09.13.18
Budgeting Season Strategies: Shifting Focus Toward Long-Term Objectives
When he joined CUNA Brokerage Services, Inc. as president last June, Rob Comfort, like most executives, had to address some pressing issues in the short run while strategically looking three to five years out. The firm’s core mission, broadly speaking, was clear: Waverly, Iowa-based CBSI, a subsidiary of CUNA Mutual Group, specializes in providing investment and wealth management services to credit unions, some 285 of them.
At the time Comfort arrived, CBSI was doing about $150 million in revenue and controlling approximately $23 billion in assets under management. In other words, business was solid, yet there was one glaring problem. "We were stuck on 400-ish advisors for five years running," Comfort recalled. "That's not to say we didn't add any new ones, but, through attrition, we basically were just treading water."
Cue the 2018 planning and budgeting session, which took place around this time last year. Building the team to 700-plus advisors was going to require some long-term thinking. It would mean not fixating on year-over-year profit increase but rather looking out at least three years.
Interestingly, his argument hinged not on financials though having command of revenue and profit estimates is a must-have for any budget proposal. In the end, Comfort’s success getting the blessing for a more ambitious growth plan reverted back to broad strokes. It started with a simple question: what is the point of all this, anyway?
'We Challenged Ourselves'
CUNA Mutual Group has never had any issues articulating its overarching mission. The firm seeks to help as many credit union members as possible achieve financial security, with CBSI’s advisors at the disposal of the credit unions they serve.
According to Comfort, CBSI believes every individual credit union member has six core financial needs: cash management, credit, growth of assets for the future, income generation, protection and leaving a legacy. “The credit union can meet the first two of those needs,” Comfort said, “but the other four can only be met through a robust investment and wealth management program.”
Comfort challenged the executive committee at CUNA Mutual Group to understand that fulfilling their mission was not possible without a significant increase in advisors. The only way to do that in today’s advisor-starved world, he said, requires a long-term approach and investment to develop the next generation of advisors from within.
He laid out a plan to meaningfully increase CBSI’s advisors, one that forsook the industry’s historical approach — that is, writing big checks to acquire advisors — instead choosing to build a completely new infrastructure that would empower advisor teams. In turn, this involved creating several new positions to allow less experienced, more diverse, high-potential individuals to enter the industry. It was time, essentially, to develop the next generation of successful advisors.
“We challenged ourselves to take make the long-term investments and sacrifices necessary to fulfill our mission, even if it meant an impact to short-term profitability,” Comfort said. To CUNA Mutual Group’s credit, they never hesitated. Today, CBSI is well along its path of plan execution on several fronts, including advisor team building.
Seizing Upon Budget Season to Pursue Change
Comfort was adamant, however, that exceptional performance could not be compromised. Without that, CBSI — or any other firm — won’t be around long enough to fulfill their greater mission. The question is not one or the other but a willingness — during budgeting season — to truly take a long view. "The payoff, in the long-term, is much bigger," he said.
Now, one year later, how is that approach going?
Nine months into their long-term investment for advisor growth, CBSI has created the first new position on the team-approach organizational chart, a true junior advisor, and they are recruiting their first class of associate financial advisors. Using an agile approach to the project, CBSI is out of the gate and moving at a pace that makes sense. They will be creating the other positions but spreading out that phase over the next year. Change takes time.
Several factors are critical for long-term success. These include making sure proper technology is implemented and that the recruiting, onboarding and training processes are thoughtfully put into place.
In the short run, there are aches to be endured. "We are having a terrific year from a revenue growth perspective," Comfort said. "Our short-term sacrifice is in capital investment and profit margin."
At the same time, Comfort said, the organization is "absolutely confident this long-term approach to advisor growth will pay off in so many ways."
“I’m grateful to be part of a leadership team at CUNA Mutual Group that takes our mission seriously and is willing to take a patient approach for a bigger financial payoff,” he said.
As the industry goes through 2019 planning, Comfort has a message for those executives who may be struggling with the dilemma of moving beyond a profit-now approach in favor of a longer-term strategy, one that carries a much higher payoff, albeit at a less profitable 2019.
Three critical pieces of advice: First, zero in on your bank or credit union’s mission and forcefully challenge executive leadership, reminding them that without real serious investment in the investment and wealth management business, they “really aren’t taking that mission seriously."
Second, figure out what investments will provide the biggest impact and "show what those investments will mean three to five years out compared to staying the current course."
Lastly, and most importantly, he noted, “Don’t give up. Fight the good fight. Escalate and don’t be afraid to challenge over and over again through the budgeting process."
Comfort believes the budgeting and planning process requires the passion, courage and resolve to advocate for our businesses.
"Look, the investment and wealth management businesses will never produce the earnings the balance sheet does, but no other business in the bank or credit union space can have as much positive impact on people’s lives,” he said. “And these businesses can produce very compelling fee income."
As the industry goes through this annual rite of passage called budget season, the bigger picture is worth keeping at front of mind.