Frequently Asked Questions – Advisory Service

Advisory Service FAQs

• What value is gained by using the Advisory Service?

  Securities markets are sophisticated and credit union asset/liability management requirements are becoming increasingly complex. Catalyst Strategic Solutions' investment advisors employ a comprehensive balance sheet approach to assisting credit unions in the management of their investment portfolios. Investment advisors make recommendations that complement the individual credit union's loan and deposit structure.  

• What can the Advisory Service do to boost my credit union's earnings?

  First, the ALM service incorporates a key ratio analysis, designed to help credit unions identify areas for improvement with regard to pricing deposit accounts and loan products. This analysis also assists credit unions in managing expenses associated with the day-to-day operations of a financial institution. Second, the advisors review the interest rate risk profile obtained from the ALM analysis to determine the prudent amount of rate risk for each credit union's portfolio. This practice enables advisors to position the credit union's balance sheet and investment portfolio. In a nutshell, it's all about managing risk and return. Finally, Catalyst Strategic Solutions' staff of investment professionals monitors the direction and outlook for interest rates and stays abreast of spreads and yields on the various investment alternatives. These practices enable them to make suitable recommendations based on the interest rate environment and balance sheet risk profile.

• How does the Advisory Service help my credit union comply with the NCUA's regulatory requirements?

  Catalyst Strategic Solutions' investment professionals stay abreast of all NCUA regulations, revisions, and "letters to credit unions" pertaining to the investment and ALM arenas. Part of the process is updating internal systems to meet all reporting requirements set forth by the regulators. Whether a credit union needs a number to close the books or to complete a call report, Catalyst Strategic Solutions' systems generate a report that will provide it. These procedures ensure that investment recommendations made by the advisory team are regulatory compliant.  

• What kind of reporting can I expect?

  Monthly, the Advisory Service will make available a complete set of "5300 ready" bond accounting reports via the website. These reports, which contain everything credit union staff will need to close the credit union's books, are available by the close of business on the second business day of the month. To give credit union accounting departments a head start, two days prior to the end of the month, a preliminary set of accounting reports is made available. These reports provide accrual detail and amortization/accretion details. Quarterly, each advisor prepares an in-depth investment portfolio and ALM review for each client credit union. This packet includes a detailed ALM review and an analysis of the current holdings in the investment portfolio. One of the integral parts of this analysis is a parallel and sustained 300-basis point portfolio shock to satisfy regulatory requirements. The analysis concludes with balance sheet recommendations.

• What if I need help with my policies?

  In the initial steps of the process, we will work with credit union management, board of directors, or any associated committee to develop a regulatory-compliant set of investment and ALM policies that suit an individual credit union's specific needs. 

• I don't understand the more complicated securities, like CMOs. How can I explain them to my board?

  At the foundation of the Advisory Service is education. An investment advisor will schedule an educational session for credit union staff and any board members that the credit union would like to include. These sessions normally take three or more hours, during which the credit union's advisor will discuss various investment alternatives in detail. Credit union staff will gain a better understanding of the investments to assist in their decision making. This education continues on an ongoing basis. As credit unions experience turnover on various committees or on the board of directors, additional educational sessions and refreshers may be scheduled. In addition to the formalized training, each credit union's advisor is available to discuss portfolio strategy individually, as necessary.

• What type of contact will I have with my investment advisor?

  The answer to this question depends on the credit union's specific needs. Catalyst Strategic Solutions' experience indicates that some credit unions like to be contacted daily, while others may only want to be contacted bi-weekly. Either way, the relationship will be tailored to best fit the credit union's needs.  

• What if I don't want to give up control of my investments?

  It is not necessary for credit union management to relinquish control of their investments. The Catalyst Strategic Solutions team works for the credit union only as an agent. After reviewing the ALM profile and identifying any liquidity concerns, the advisor makes a recommendation for a security that fits each credit union's balance sheet. An appropriate credit union staff member will make all final decisions regarding whether a security is purchased. Upon approval, the advisor buys the security in the credit union's name and it is delivered directly to the credit union's safekeeping account versus payment.  

• Then what makes the Advisory Service different from a broker?

  Catalyst Strategic Solutions' Advisory Service is fee-based. It is not commission-driven like a brokerage firm. All advisory staff members earn salaries and do not receive commissions. This arrangement guarantees that Catalyst Strategic Solutions' advisors strive hard to do what is in the best interest of the credit union – not the advisor. As an advisory service with a sustained relationship with the buyer, Catalyst Strategic Solutions lives with the recommendations its advisors make, and are therefore incented to make recommendations that benefit purchasing credit unions.  

• What specific expertise and experience do the members of the advisory team have?

  The investment advisors and ALM analysts represent a broad spectrum of credit union and financial services industry experience. This team of professionals combines this wealth of knowledge with the market analytics available on the Bloomberg Financial Markets system to provide sound investment advice, helping each credit union develop specific strategies to reach its financial goals.