Credential Financial Ramps Up Services

When tinkering won’t do, a new platform may be needed.

In January, Credential Financial Inc., the national online brokerage and investment service for Canada’s credit unions, launched a self-clearing service to greatly expand the financial services it provides. The service includes all the mechanics of trading and processing – the backroom work that all financial institutions require – in financial instruments such as insurance, mutual funds and, most recently, managed accounts. Launching the service was the final step in a long and labourious conversion process and it now allows B.C.-based trading houses and Credential’s client credit unions to offer more sophisticated services to clients.

The Problem

Four years ago, the people at Credential realized that the investing needs of the company’s 270-member credit unions were evolving so quickly that Credential’s online trading platform, Credential Direct, would soon be incapable of offering the full range of investment services clients required.

Credential needed to devise services that could handle new forms of wealth management – today’s term for investment services – such as more sophisticated investment vehicles. Credit unions had grown beyond their working-man roots, and now served clients ranging from first-time home buyers requiring loans to more knowledgeable high-net-worth individuals looking for more sophisticated investments than entry-level mutual funds and GICs.

The Solution

The people at Credential decided they needed to convert from mere facilitator of trades to wealth management partner with their client credit unions. So four years ago Credential began a carefully constructed campaign to ease the metamorphosis. Initially, Credential offered consulting services on wealth management to credit unions. Its representatives travelled the country explaining Credential’s plans to clients and gathering feedback and providing advice to any credit union that requested it.

Then Credential went deeper by offering advisory services such as practice management and a wider range of investing to credit union advisers themselves. These advisers would, in turn, offer the more sophisticated investment management services to their own clients. Since credit unions range from very large institutions like Vancity in B.C. to very small community credit unions in Eastern and Northern Canada, Credential had to ensure that all advisors understood the ins and outs of higher-level investing.

Next, it built out the programs and infrastructure needed to facilitate this new level of investment. The conversion would require a much more robust communications and processing system to rapidly and accurately process all the new investments.

Lastly, Credential applied for permission to establish the clearing-house service that launched in January 2013. It provides a back-office function for client credit unions and their customers and allows Credential to serve other financial institutions outside the credit union system.

Proof came quickly that Credential’s long conversion process was working – and was needed. In the four years since the conversion process, Credential’s assets grew by 15 per cent, from $8.5 billion to $13.5 billion, and are expected to continue on that growth path for some time to come.

Lessons

• Collaborate with clients: Before expanding, Credential consulted with big and small credit unions.

• Build your infrastructure: Expansion often requires more complex systems that must be carefully built and tested. Credential’s took two years to build.

• Allow for future expansions: The four-step conversion process also lays a path for future growth, especially outside the credit union system.