CommunityAmerica Credit Union adopts new robo advisory tool

To meet growing consumer demand for wealth management offerings, executives at CommunityAmerica Credit Union in Lenexa, Kansas, have adopted a new robo advisory tool.

Mike Haggerty, chief operating officer of the $5.3 billion-asset CommunityAmerica, said interest in digital investing has steadily increased among his credit union's members since the COVID-19 pandemic began. This trend inspired him to integrate the robo advisor into the credit union's digital banking platform late last year.

"Whether a member is investing $200 or has significant investable assets, they want flexible, varying levels of access and control to manage and grow their wealth," Haggerty said. "These tools help attract more members and we believe adoption rates will continue to increase."

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Robo advisors, automated investment services that manage portfolios with little to no human intervention, have been a popular tool for banks like Truist Financial, Regions Financial and the London-based challenger bank Revolut that seek to reach consumers in various income brackets. Some banks have dropped the robo-advisor idea, including JPMorgan, which converted its Automated Investing product to self-directed investing early last month.

A recent dive into the Federal Reserve's Survey of Consumer Finances by Pew Research Center found that 58% of U.S. families overall had exposure to the stock market in 2022. Roughly 66% of white households owned directly or indirectly owned stock as the largest share, while 39% of Black families and 28% of Hispanic families had some exposure to stocks.

Copper Financial, the Lenexa, Kansas-based credit union service organization, formally rolled out its Guided Investing product in January to members of CommunityAmerica, which is the parent company of the CUSO. Copper Financial is an SEC-registered investment advisor and FINRA-registered broker-dealer.

Members start off by answering a standard questionnaire to gauge their risk tolerance and help identify what goals they seek to achieve, such as retirement. Based on their responses, the product will sift through a series of externally managed portfolios and select the one best suited for their appetite.

Model portfolios purchased by Copper Financial revolve around exchange-traded funds invested in stocks, bonds and cash. Rebalancing is initiated by the company that developed the portfolio on a monthly to quarterly basis.

To fund the investment account, consumers can transfer money from a secondary account held at the credit union or from a separate financial institution through an integration with Plaid.

Once the account is funded, Copper Financial will begin trading securities according to the selected plan on behalf of the member. The Dallas-based investment technology firm Apex Fintech Solutions helped develop the new product, and acts as the custodian agency for holding the purchased securities.

Other credit unions have joined in on the wealth management trend with campaigns of their own.

Both the $6.8 billion-asset Kinecta Federal Credit Union in Manhattan Beach, California, and the $4.4 billion-asset Municipal Credit Union in New York, debuted their advisory and investment platforms in the latter half of last year, and have seen member interest grow since then.

Fintechs like Betterment, Wealthfront and Stash continue to compete in this space. Aura Finance, a San Francisco-based financial wellness platform, combines educational resources with a direct indexing strategy handled by robo advisors to help consumers better understand their income needs and invest for the future.

"There has been a significant increase in interest [toward] wealth management tools among consumers, driven by a greater awareness of financial health, increased financial anxiety —  thank you inflation — and the democratization of financial information," said Kelsey Willock, co-founder and chief executive of Aura Finance. "Individuals don't believe they can live like their parents' generation and are looking to alternative solutions to build wealth outside of homeownership."

Some financial institutions opt for a hybrid approach.

Sheri Perkins, senior vice president of wealth management at the $6 billion-asset Citadel Credit Union in Exton, Pennsylvania, said consumer shifts toward automated advisory tools have made them a priority for the credit union but that there's still a need for personalization. "These digital tools are a vital part of how we plan to continuously enhance and expand our services. … However, traditional in-person advisors offer a level of personalized service and nuanced advice that robo advisors cannot match, especially for complex financial situations," Perkins said.

As access to wealth management products continues to grow, and consumer awareness of the "importance of financial planning and investing for long-term goals" becomes realized, more financial institutions could seek to offer robo advisors, said Ashley Longabaugh, principal analyst in Celent's wealth management division.

"Advancements in technology and the increasing comfort with digital solutions have contributed to the rise in popularity of robo advisory tools," Longabaugh said.