Alterna savings, the third-largest credit union in Ontario, is charting an ambitious course for growth. Its strategy includes building a strong in-house financial advisory services team, seeking out expansion through mergers and acquisitions, and even developing a project to offer short-term consumer loans should future legislative changes allow credit unions to do so.

Since the creation of Alterna Savings in April 2005 — following the merger of Ottawa-based CS Co-op and Toronto-based Metro Credit Union — the combined entity, which is headquartered in Ottawa, has grown to $1.8 billion in assets, with 150,000 members, 24 branches and 500 employees. Only St. Catharines, Ont.-based Meridian Credit Union and Whitby, Ont.-based Desjardins Credit Union are larger in Ontario in terms of asset size.

A key element to Alterna’s growth is its move to build a full-service financial advisory business to serve its members. Alterna has hired four IDA-licensed representatives and, as of last fall, shifted 12 part-time mutual fund-licensed reps into full-time roles. (There are still 22 part-time mutual fund representatives at the branch level.)

Alterna is also referring clients who make a formal request for insurance information to four agents employed by Credential Financial Strategies, the insurance arm of Vancouver-based Credential Financial Inc. , which is owned by the Canadian credit union system.

“What we’re doing on financial advisory services is probably entirely new ground in the credit union system,” says Alterna president and CEO Gary Seveny. “We’re kind of leading the way.”

Norm Ayoub, Alterna’s senior vice president of business development, says that while other credit unions provide advisory services, Alterna is differentiating itself by taking a comprehensive approach, emphasizing planning over products. He adds that Alterna has grown its financial advisory business to 15%-20% of overall revenue from 7% last fall.

“We see financial advisory services as an integral part of growing our asset base, our revenue base. But, critically and most important, it serves our membership, who really want these services,” Ayoub says.

Alterna brought Don Wilson, a 26-year investment industry veteran, on board in January to steer the company’s financial advisory services division. Wilson says that Alterna plans at least to double its financial advisory staff in the next five years. “It’s a very exciting venture for us,” Wilson says.

All Alterna’s financial advisory business is being handled through Credential Financial Inc. Markham, Ont.-based Worldsource Wealth Management Inc. was handling the investment accounts that came with CS Co-op in the merger, but these are now being slowly transferred over to Credential as well.

LOBBYING FOR INSURANCE

On the insurance front, Seveny says he’s disappointed by draft legislation changes to the Credit Union Act tabled in August by the Ontario Ministry of Finance. The draft failed to mention any expanded powers allowing credit unions to sell insurance in branches or to own insurance brokerages, as banks do. The province’s credit unions had been lobbying for expanded insurance powers, and the Credit Union Central of Ontario continues to do so on their behalf.

Seveny believes credit unions would have expanded insurance powers if the politicians and bureaucrats weren’t so timid. “These powers are minimally acceptable for us to do business in the financial services industry. There are no longer four pillars,” he says.

The Canadian insurance industry has lobbied hard against expanded insurance powers for banks and credit unions, arguing this would not be in the best interests of consumers.

When it comes to expansion on the ground, Alterna is building a new flagship branch in Scarborough, Ont., and is looking at another key area in Toronto. But building new branches is not integral to its strategy.

“Our interest is in adding new branches from an existing institution,” Seveny notes, speculating that other credit unions might be taking a look at Alterna’s growth over the past year and seeing the advantages of merging.

Alterna is also working on a project to provide future customers with short-term, small loans as the “payday loan” companies now do, but at more reasonable terms. The service would be part of Alterna’s branch services and would not be set up as a separate storefront brand.

This past spring, Alterna hired Bob Whitelaw, former head of the Canadian Payday Loan Association, to head up the project. Part of his role is to lobby government to clear up grey areas in lending legislation and allow credit unions to enter what has become a booming albeit controversial lending business.

@page_break@Seveny says the need for short-term, small loans is a service that credit unions could provide to consumers at better terms than the payday-loan shops, and with an ethical component. “Any clients who would avail themselves of this, when we do offer it, we would be working diligently to educate and inform them of the necessity of breaking the borrowing cycle,” he says.

So, is Seveny worried that Alterna’s overall strategies for growth are making it less credit union-like and more bank-like?

“The growth aspect is not to become more bank-like; it’s to become more accessible to customers … to fulfill the objectives that members are expressing in terms of convenience,” Seveny says. “We feel very strongly in our conviction of being a co-operative financial institution.” IE