The Investment Option No One Talks About

by Becky Reed, CEO of Lone Star Credit Union

The Global Pandemic has impacted us all and certainly credit unions have been affected in multiple ways.  We’ve gone from panicked members withdrawing all their money to getting loads of stimulus money coming in that no one is spending.  Like you, as a credit union leader I am tasked with managing high liquidity with low loan demand.  Naturally I’m looking at my investment options.  Have you looked at them lately?  I’m having flashbacks to 2009.

Credit unions don’t have many options when it comes to investments. There is one investment, though, that doesn’t get talked about a lot – investing in a CUSO. Credit Union Service Organizations (CUSOs) are for-profit businesses that credit unions can invest in as long as that business helps other credit unions or credit union members. With rates being near zero and liquidity at highs not seen in a decade, now is the perfect time to invest in a CUSO!

CUSOs are the means for credit unions to acquire technology tools and expertise in a company that is totally aligned with credit unions.  CUSOs are also a means to create alternative streams of income. The pandemic has given credit unions the capital to make strategic investments that will make credit unions stronger and better able to serve members in this world that has become even more dependent on technology.

There is a myth that exists in the credit union industry that I’d like to dispel. A credit union does not need to be large or have millions of dollars in order to invest in a CUSO! You don’t need to start your own CUSO, you can invest in one that already exists. Not all CUSOs are wholly owned by one large credit union – there are many CUSOs that have multiple credit union investors, and CUSOs are offering investment opportunities both large and small. Some CUSOs have been operating successfully for a long time and can provide a nice return right off the bat, while others need start up money now with a potential return later.

Want to learn more?  Check out the National Association of Credit Union Service Organizations, or NACUSO, at www.nacuso.org.  There’s lots of information there about how to form a CUSO, invest in a CUSO or use a CUSO.  If you become a member of NACUSO, you can participate in the very popular “Next Big Idea” competition where you get to watch CUSOs pitch to “Shark Tank” credit union investors and vote for a winner.  This happens every year at the NACUSO Conference, which unfortunately may not happen this year (for obvious reasons).

If you are considering investing in a CUSO, you should also spend some time getting your board and leadership team educated on CUSOs and CUSO Investments.  There are many resources available to help you with that, not only from NACUSO but also from your local League or Association.  There are consulting firms that can assist as well.  Your board will need to be heavily involved with the investment decision and your leadership team will need to understand how to manage it – the CFO in particular.  As far as investments go, it’s one that can actually be fun! You get to take part in helping another business and our industry, which can be quite rewarding.

I know I’ll be looking at CUSO investment opportunities now, and you should put CUSO strategic investments at the top of your to-do list!

Becky Reed

About the Author: Becky Reed is no stranger to credit unions, with over 20 years of experience at credit unions of varying asset sizes and in various roles, including President and CEO, she understands the unique challenges of the credit union industry. Becky is also the co-founder of the Credit Union Service Organization, PureIT CUSO and serves as its Board Chairman.  She was elected to the Board of Directors of NACUSO in 2018.