October 3, 2023
In the fast-paced world of finance, gaining valuable insights from industry leaders can be a game-changer for credit unions and financial institutions. Pete Hilger, CEO of Allied Solutions, is an industry giant with over 30 years of experience. On a recent 22 Minutes in Lending, Pete shared his wisdom on critical topics reshaping the financial landscape. Delving deeper into these insights, Pete offered a comprehensive overview of liquidity management, strategic partnerships, fintech investments, and strategic acquisitions.
Liquidity Management in a Changing Landscape
One of the most pressing challenges for financial institutions today is liquidity management. With unprecedented deposit growth and the impact of the COVID-19 pandemic, institutions must find effective ways to retain deposits and ensure they have enough liquidity to support their lending activities.
Pete emphasized that liquidity management extends beyond simply having enough deposits on hand. It involves managing investments effectively and is particularly relevant in a prolonged low-interest-rate environment, where institutions often seek higher returns by extending the duration of their assets. However, with the recent swift rise in interest rates, institutions face a challenging situation. Selling long-term investments would result in an immediate hit on their financials.
Key Takeaway: Financial institutions should evaluate their investment portfolios carefully. In times of rising interest rates, reposition assets for better returns. This proactive approach can help institutions strike a balance between liquidity needs and investment returns.
The Power of Strategic Partnerships
In a competitive landscape dominated by larger financial institutions, partnerships have emerged as a powerful tool for credit unions and smaller financial organizations to level the playing field. Pete highlighted the importance of collaboration and leveraging collective strength to negotiate better deals and create compelling value propositions for members.
The trust and confidence institutions build with their members are crucial in these partnerships. Marketing plays a pivotal role in this regard. Pete stressed the need for financial institutions to invest more in marketing efforts at the individual brand level and marketing the industry as a whole. Institutions can enhance their market presence by pooling their resources and presenting a united front.
Key Takeaway: Building trust and confidence among members is paramount. Financial institutions should collaborate with partners to develop depository tools and marketing strategies beyond simple interest rate offerings. These strategies can help drive deposit growth and member loyalty.
Strategic Fintech Investments
Fintech investments have been a buzzword in the financial industry for some time now. However, Pete offered a word of caution. He emphasized the need for institutions to be selective when considering fintech investments. It’s not enough to merely own a small percentage of a fintech company; institutions should ask themselves if the fintech aligns with their core business and whether they genuinely intend to use it.
Moreover, Pete suggested that the primary goal should not be limited to owning a stake in a fintech but influencing its direction. Most fintech companies have an eventual end game of being acquired, and institutions should aim to be part of that success story.
Key Takeaway: Fintech investments should serve a clear purpose. Institutions should actively seek to influence the fintech’s trajectory and be prepared to participate in its success when it gets acquired.
Strategic Acquisitions for Long-Term Success
Allied Solutions has a robust acquisition strategy, and Pete provided insights into their approach. He categorized acquisitions into two main types: those made to increase the capital pool temporarily and those aligned with long-term corporate goals. Each acquisition serves a specific purpose and contributes to the company’s overall strategy.
This strategic approach to acquisitions has allowed Allied Solutions to stay agile and adaptable in a rapidly changing financial landscape. By carefully selecting acquisitions that align with their long-term vision, institutions can position themselves for sustainable growth.
Key Takeaway: Institutions should consider acquisitions that align with their long-term goals. Strategic acquisitions can improve bottom lines, reduce charge-offs, and enhance overall client support.
Navigating Challenges in the Auto Industry
Pete shared insights into the auto industry, which has been undergoing significant changes. He emphasized the importance of credit unions and financial institutions adapting to challenges promptly. For example, the rise in repossessions presents a unique set of challenges that institutions must address to mitigate risks effectively.
Key Takeaway: In rapidly changing markets like the auto industry, staying vigilant and promptly adapting risk management strategies is crucial. Institutions should closely monitor market trends and adjust plans to protect their bottom line.
The financial industry continuously evolves, and staying informed and adaptable is critical to thriving in this ever-changing landscape. Pete’s insights serve as a beacon of guidance for institutions looking to navigate these challenges and emerge more potent in the competitive world of finance.