InvestiFi President: Credit Unions Must Offer Digital Investing to Retain Gen Z

Banks, especially small banks such as credit unions and community banks, risk losing account holders to investing platforms.

The checking and savings accounts housed in primary financial institutions (FIs) provide the on-ramps, so to speak, for individuals to take their money and invest it with the likes of Robinhood , particularly as cryptocurrencies become more mainstream alongside traditional equity trading.

Todd Clark , newly named president and chief operating officer at digital investing platform InvestiFi told Karen Webster that consumers, especially young consumers, want to invest with their primary FIs. For forward-thinking banks that offer a seamless continuum between checking accounts and investment accounts, where the former funds the latter, as well as financial literacy education (to invest and save responsibly), the opportunity exists to expand their financial services ecosystems.

“There are a lot of credit unions that already have investment solutions, but they are mostly advisory-based solutions,” Clark said. “Your typical advisor does not get involved with someone until they have $25,000, $30,000 or $50,000 in their account. But there are many people out there who are actively seeking pathways to invest $5,000 or $7,000, and they don’t need an advisor. They want to do it on their own.”

That’s why they move their money to Robinhood and SoFi .

Expanding Beyond Crypto

InvestiFi offers digital investing solutions to banks through a white-label platform that integrates with FIs’ existing infrastructures, and FIs brand those services as their own.

Clark’s new tenure with the firm comes after a stint as CEO of CO-OP, which merged with PSCU , now Velera . His time on the board of InvestiFi came amid his taking a year off from full-time work in the wake of the merger.

InvestiFi, for its part, has moved beyond its roots earlier this decade, enabling crypto trading to its status as an InvestTech platform that allows trading across a host of asset classes to be conducted from deposit accounts.

“We’re signing up a credit union or a community bank a week now,” Clark said.

For banks, the economics of the self-directed model are tied to the fact that customer funds are kept in-house.

“The only time [the money] is not on the credit union balance sheet is when it is actually being held in a stock or in a crypto asset,” Clark said. “…They see the money coming and going, rather than going [out to other investment platforms].”

Robinhood, for example, made $1 billion last year from the cash sitting in investment accounts, “and we’d rather see that cash sitting in credit unions and banks’ accounts rather than at some party,” Clark said. Core deposits, after all, are the least expensive deposits that FIs can have — and those deposits fund the rest of the business.

Asked by Webster about the profile of the credit union that is embracing the platform, Clark said InvestiFi has the top 20 credit unions among its roster of customers but also has been signing up “$150 million credit unions on the regular. The solution is easy to implement and to master. If they already have advisory services, we’re helping them target the people with between $1,000 to $20,000 who want to open up an account, invest small dollar amounts, or experiment with crypto for the first time.”

That profile nearly encapsulates young banking customers — millennials and Generation Z — who expect a digital, app-driven experience.

InvestiFi’s roadmap includes expanding the securities trading functions that were launched last fall and the robo advisor that debuted this year. The company will also be moving to IRAs.

“We’re spending a lot of time with connections to banks’ cores and will continue to build out our platform,” he said.

There’s also the potential to offer leads to brokers that are already connected to credit unions in what Clark said, “is a partnership with them, and not a competitive environment.” In the meantime, there are training and financial education videos embedded within the platform and solutions extended to end users.

The potential is vast, as there are thousands of credit unions still to be connected to InvestiFi’s platform, which can scale easily as volume and processing demands, he said.

“The vast majority of people would like to invest like this with their credit union,” said Clark, who told Webster, “There’s a huge component of trust with those banks … we’re here to stay.”

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